The year has started and we know some things, but we do not know other things. We know a vaccine is available and people are beginning to receive it, although the numbers are a far cry from 50%. If they are over 50%, there is high probability the affects of COVID will decrease rapidly. If and when that happens and if COVID mutations do not affect the general population, tourism and hospitality will open up and increase. As people are able to move around freely, one of the big drivers of the economy is for consumers to shop. Where do they shop? How do they shop? do they go to malls again? Do you feel comfortable going to a mall?

In an article by April Joyner of Reuters, equity investors are asking themselves should I invest in retail stocks? The SPDR S&P Retail ETF which tracks a broad group of retailers is up 40% in 2020, what will it do in 2021?

Congress recently passed a stimulus bill which puts about a trillion dollars in the economy, some of it goes directly to consumers or taxpayers, what will the do with it?

Eric Marshall, portfolio manager of Hodges Capital Management noted JC Penny, J Crew Group, Pier 1 Imports and Neiman Marcus have declared Chapter 11 bankruptcy. This allows the companies to restructure their operations, close stores and keep the best ones open.

On-line shopping has increased, by researching the stores on-line sales and expectations, you have an idea of what to expect in the future. One method is to determine if on-line shopping for you was easy at their sites. What is your expectation for shopping in September?

Alex Ely, chief investment officer of Macquarie Investment Management said the fundamentals are going to be better in the second half of 2021 or 2022, you need to buy 6 to 9 months ahead of time.

Linking to dividend paying stocks, prior to COVID having retailers in your portfolio was a very good thing for there was consistency in the sales and some companies usually did very well. Since COVID retailing has changed, will it go back or are hybirds here to stay. When you examine your shopping habits and then people around you, there will be an indication of what shops to look and which ones to avoid. It will take 2 years before retail stores are consistent again, which means it is better to seek alternatives first before jumping into the retail sector.

There are more questions than answers, till the next time – to raising questions.

Macro economics are important because the macro news will determine how the federal reserve and the government enact policies. The jobless number gives an indication of how the economy is doing and the confidence of those that are working. For those that are working, if the unemployment rate is low, they have more choices, even if they do not do anything about it, to move to jobs which they like or think they would like to do. Sometimes the mobility is about money, sometimes it is about management, and there are a host of other factors.

In an article by Lucia Mutikani of Reuters, the early December filings for Americans filing first time claims for jobless numbers unexpectedly rose. President Trump has tried to pretend COVID is not a problem, but the number of cases and the people dying have increased and the only remedy is to shut down the economy. Shutting down the economy is to ensure people have little place to gather or more pain for those in the hospitality and tourist sectors.

The good news was in homebuilding where the numbers continue to rise, primarily people moving from the cities to the suburbs and country, to be in bigger houses and more space around them, if they have jobs which allow they to work from home.

The number of claims increased to 885,000 which is higher that what economists polled by Reuters had forecasted, they were expecting 800,000. (in 2007-09 Great Recession the jobless numbers were 665,000).

The jobless numbers are the reason why Congress had pressure to past a stimulus package and the federal reserve is determined to keep interest rates low.

Linking to dividend paying stocks, as long as interest rates remain low, expect a demand for dividend paying stocks where the yield comparison is higher. With all investments, there is comparison over something else, what is attractive now and for the next 3 months. Hopefully with the COVID vaccine and a new administration in the White House which acknowledges the problems of COVID, the economy can move forward. However do not expect interest rates to move in the next year.

There are more questions than answers, till the next time – to raising questions.

All of us are bias when we come to investing and just about everything else in our lives. Depending on how you earn your income, you are likely to look to that sector first. Depending on the products and services you use, you might look to them second. You use them and can keep an eye on them.

During COVID when many people stayed in and around their homes, the number of pets increased. You can look at the companies which provided pet food and if you have a pet, maybe which companies provide the other costs of owning a pet. If you have one, hopefully you have the best cat or dog or whatever you own.

According to the American Pet Association, in 2019Americans spent $95.8 billion on their pets up 5.7% from 2018. During 2020, the number went over $100 billion.

Nielson Co which does data and market measurement shows sales of leashes, collars and dog houses has been growing in double digit numbers. Between April and June they were up 16%, up another 13% in the summer and in the fall they went up 15%.

How can you invest? Adam Mayers of the Wealth Builder invesment newsletter noted 4 companies:

Zoetis based in New Jersey, its stock is up 20% to $161.36, the dividend yield is 0.5% and PE ratio is 46.5%

There are ETFs such as the Harvest Healthcare Leaders Income ETF which holds 20 of the largest global health care companies including Zoetis.

Elanco Animal Health was spun off from Eli Lilly in 2019 and recently purchased Bayer Animal Health for $6.89 billion.

Merck & Co animal health business is a division but it generates $4.4 billion or about 10% of Merck’s reveue.

Linking to dividend paying stocks, often you are drawn to companies with a monopoly or near monopoly or similar to a utility. However, there are many companies to invest in and sometimes the answer has 4 legs and is in your home. In 2021, be open to opportunities, keep the bulk of your investments to something you know are bias in and 2021 will be another good year.

There are more questions than answers, till the next time – to raising questions.

When you examine the economy, after you believe your income or job is safe, you look for areas of the economy which need to be doing well and then you are convinced something has changed for the better. One of the major economic drivers in many cities is the airport, both business and passenger traffic. The higher the capacity or volume of people the more the economic activity from the travelers and the well being of the airport. Generations ago, the economic activity went around the railway station, now it is the airport. If the airport you would typically fly from is doing well, then you can easily believe the economy is doing better.

All industries have conferences and in 2020, most were virtual but they were still held. In an article by Nicolas Van Praet the Chief Executive of Airbus Guillaume Faury spoke to the International Economic Forum of the Americas, virtually. His company is the competition to Boeing, he said 2021 is shaping to be a chaotic year for the global aviation industry but he sees hope. The expectation if you compare the end of 2021 to the end of 2020, they will be a much different situation.

In every industry, they like order or predictability to know what to expect, Mr. Faury said an orderly return to air travel for passengers is the priority for Airbus and its customers. In 2020, we have seen a very disorderly process, which countries are open and which ones are not.

At the moment there are no widespread harmonization of the rules, it is patchwork.

For Airbus, 2020 has been a difficult year, it cuts its production rates by 1/3 in April, cut its workforce by 17% and it October it hopes to return to breakeven on a cash flow basis in the last 3 months of 2020.

Airbus’s customers are the world’s airlines and they have not cancelled airplanes just asked to defer them

Two big costs for airlines is fuel and financing, both have been low for the past year which has allowed airline customers to purchase more fuel and cut borrowing costs. Thankfully many governments have offered support to the airlines.

Linking to dividend paying stocks, ever since the Wright Brothers flew the plane, people have been interested in plane travel. With COVID the mixing of people has been a limiting factor which has hurt the airline industry including the 2 big manufacturers – Boeing and Airbus. We all look for something or guideposts to tell us whether an industry is doing well or not. The health of a middle income economy has been the airport, do you have guidelines for your investments?

There are more questions than answers, till the next time – to raising questions.

Now that Tesla is included in the S&P 500 Index, it means all the index funds which mirror the index own Tesla shares or the number of people who technically own it has grown larger. With the inclusion in the index, the price of the shares rose or the value of the company increased. Imagine if you won millions in a lottery, as a good steward you would do many things, but it all likelihood hopefully a small portion would be wasted. Your inbox would be full about all the great opportunities to put your money in and some of them would fall below what you invested in. The larger portion, ideally you put into long term money which could not be touched until you figured out a good plan.

As Tesla’s shares rise, every Mergers and Acquisition Banker is pitching the Tesla management team with ideas of what companies they should buy with their stock.

In an article by Eric Reguly, 20 years or so the biggest blockbuster M&A was Time Warner -AOL. The internet was becoming a thing and AOL had a policy of sending every household a disc so people could upload the AOL and you email address would be AOL. Given it was free and Wall Street was valuing the eyeballs you had, not whether the company made money, but number of people using your service, the shares of AOL soared. AOL was going to be the big thing, as the price of the shares kept going higher, the business which made little money but had lots of promise, decided to find a company that was big, stable and had lots of cash. Time Warner was the company and Jerry Levin’s company trading at 11 times earnings joined AOL trading at 35 times earnings. If you examine the Time Warner website, AOL is not mentioned, the merger did not work on well, but the idea blending content with the internet has over the years.

Christoper Bloomstran, president of Semper Augustus Investments of Colorado believes it would be foolish for Elon Musk not to buy GM or Ford. Telsa is up 840% in the past years taking its market value to $615 billion which is 6 times GM and Ford combined.

Telsa will sell 500,000 cars in 2020, GM will sell 7.5 million vehicles.

Telsa makes most of its money selling zero-emission credits to rival automakers not selling electric vehicles.

Tesla is a data driven energy company, but GM has an abundance of factories, engineers, suppliers, distribution centers and dealers.

Should they merge? maybe, maybe not.

Linking to dividend paying stocks, one of the wonderful things about a company that consistently makes money is it should not about capital allocation and what investments to do and what investments to stay away from. Making profits is a good thing, managing the money is an even better skill. In your portfolio, the companies are pitched on a regular basis, what they say no to is sometimes why you invest in them.

There are more questions than answers, till the next time – to raising questions.

December is the year end and in the stock market, there are 2 aspects to that year end. One is tax loss selling or possibly reducing your portfolio by selling the losers and using the deductions against the capital gains on the winners. In the investment bank world, December is when the bonus is paid and people look to the next year. What will 2021 look like?

Given the vaccine, we all hope 2021 will look more like 2019 than 2020 with the rise of hospitality and tourism in the economy. We hope people can gather in large crowds to celebrate concerts or sporting events or events celebrating the country. In the broad outlook, the issue is always what do you think will happen to interest rates and where will they be at the end of the year? If interest rates rose to above 5%, that would be great for savers, invest your money to receive 5% worry free, but not good for the economy. In all likelihood interest rates are going to closer to where they are till summer, then maybe the economy will be opened up. As long as rates are low, dividend paying stocks are a very good investment.

In a article by Scott Barlow – he notes Merrill Lynch’s Bob Farrell’s 10 Rules of Investing includes the warning When all the experts and forecasts agree – something else is going to happen.

At the moment many forecasts are similar, Mr. Barlow mentions some of the forecasts he enjoys reading include: Michael Wilson and Andrew Sheets at Morgan Stanley, Savita Subramanian from B of A Securities, David Kostin of Goldman Sachs. Mr. Barlow says he reads them to identify underlying market trends such as value vs growth stock performance and the effects of rising bond yields on dividend paying equity sectors.

As far as changing his portfolio to do market timing, never. Why? if the predicted trend arises and asset values increase, there is usually plenty of time to put that knowledge to work through actual market transactions.

Linking to dividend paying stocks, one of the reasons you buy them is time is on your side. As long as the company is profitable and can pay its dividend, then you do not have to be a hurry to get on track with the latest trends. The bulk of your portfolio is long term invested and you do not have to make a change every week. Follow the trends, listen to what people are saying but take your time for patience in long term investing in good companies is a good thing.

There are more questions than answers, till the next time – to raising questions.

Soon President elect Biden will be in office and one of his policies will be the Green New Deal, it is a plan to reduce the carbon used in everyone’s daily life. Some will be solar and wind methods to generate electricity. Some of the plan will include retro fitting buildings such as your home and office building to use less oil. Save money by investing in methods to reduce your energy costs, likely with some sort of government rebate on your expenses.

Those are the general ideas of the green new deal, but how do you as an investor know which companies to invest in and which ones are really green? This has been an ever growing issue since BlackRock, the world’s largest asset manager of $7.3 trillion said it planned to make environmental sustainability a key plank of its investment strategy.

Last January, Chairman Larry Fink used his annual letter to CEOs to predict a fundamental reshaping of finance because of the growing awareness that climate change poses a risk to investments. BlackRock said it was going to reduce the shares of polluting companies and also to launch new, eco-friendly investment products.

In an article by RitaTrichur, outlined some of the difficulties that occur when trying to do the correct thing with ESG or Environmental, Social and Governance. If you go to the grocery store and see the organics label guarantee on the package, then you have a better idea the product is 100% organic. If you do not see the label, then are the manufacturers using the word loosely? You may not be positive.

It is the same way in investing, what is a green company and what is a company doing some good green things and some not? Is it green or as long as it is making an effort is that good enough? If you invest in insurance companies because of the risk for example flooding has, you want to know how much of the portfolio is risk to flooding? what are the extra costs over the past few years? (the writer owns a policy by a farm mutual and one year they wrote, we had a rash of barn fires so we did not make as much money. The next year all barns must have extra preventive measures in the barns. The following year fewer barn fires, the insurance made money). Can governments and regulatory bodies make some standards to know what is green and what is not?

Linking to dividend paying stocks, when you buy a oil pipeline, your first priority is not if the company is green or not, but does it have contracts to ship oil and gas through the pipeline to the refineries. What percentage of the market do they have and can they raise prices every year? The economy is still based on carbon, but as we look to the future, there maybe companies that can deliver similar results in a more green economy. When you start to see them, then it makes sense to look at the alternatives. We all have different reasons to owning a stock, as you change including the environment is a good thing to add.

There are more questions than answers, till the next time – to raising questions.

This year we do not have to worry about inflation and likely next year, for growth and inflation usually go hand in hand. If there is growth people are chasing fewer resources, which tends to push up prices which causes inflation as every company increases prices because their prices went up. Normally central banks are doing their best to maintain a balance between growth and inflation.

For most of us, we do not have to worry about the large macro issues, because until the banks charge high fees or increases rates for investment certificates, we grin and bear it or stay calm and carry on. One person who does worry about macro trends is Phillipp Hildebrand, the vice-chairman of BlackRock and former Swiss central bank chief. BlackRock is the world’s largest asset manager and it is reasonable thing to examine their website to see some trends on it.

In a recent interview with Tim Shufelt of the Globe, Mr. Hildebrand said ultimately central banks need independence again, so they can react when inflation expectations again. For the past 30 to 40 years, the control of inflation expectations is the anchor of the whole monetary system.

Mr. Hildebrand does not see a plan to move from limiting the damage of COVID to being worried inflation. The challenges include sustainability, debt levels which the OCED average is probably running at 120 to 130% of GDP. If and when inflation comes back, what happens to the cost of servicing costs of the debt. Higher inflation means higher interest rates means higher costs to servicing the debt.

Linking to dividend paying stocks, one of the things as individuals want is the economy to return to what is considered normal and people can and want to meet and greet in large numbers. As we move to normal, then governments will need to pay attention to the size of deficits and cutting the costs of government. As long as dividend paying stocks are yielding more than bonds, leaving your money in dividend paying stocks is a very good thing. Later in 2021, hopefully you will look at bond yields and dividend yields to diversify your holdings.

There are more questions than answers, till the next time – to raising questions.

On the first of December, Lance Uggla signed a contract to sell his London based company IHS Markit to S&P Global Inc. S&P stands for Standard and Poor and they provide financial data from credit ratings to market indexes. Mr. Uggla started his company to provide mark to market data for exotic fixed income products including credit default swaps.

If you watch TV and movies about Wall Street you see traders looking at screens and doing trading, the issue is who provides that data? S&P Global and Markit provide the data and equally important every time the screen is turned, there are recurring nature to the revenues.

The nature of providing data is to have recurring revenues a company needs scale or to get bigger because there are cost savings on IT infrastructure and as a company gets bigger, it can sell other products or bundles to the users. The more people trade, they need a platform which has data and then you go from there.

Linking to dividend paying stocks, companies that have recurring income are very good to own, every industry has the companies that provide the data or tools for the industry to function. Many people look at the providers of the function, but what tools or data are they using? Then it is possible to be in the industry, earning profits and at the end of the year – knowing you had a good one.

There are more questions than answers, till the next time – to raising questions.