During the COVID shutdown you might have gone to reading and maybe try to escape with wonderful books such as Robinson Crusoe, it was written by Daniel Defoe and it was a best seller during his lifetime. This means he would have savings and could make investments or pay off his debts. In an article by Larry MacDonald and Daniel Defoe is a lesson in what not to do when you invest your money.

When Mr. Defoe was in his 20’s he was an easy sell for get rich schemes. He was fortunate to have married into some money with his wife’s family but think about commodity prices. He tried to get rich in commodities – cows, bricks, tobacco, hosiery, honey, land, and wine are some things he invested in with little knowledge and very poor results.

In 1866, Sir William Phips went to the Caribbean and came back with gold, silver and jewels from a sunken ship. The reward to his shareholders a 10,000 % dividend. A few years after Columbus discovered Mexico for Spain, Spain’s conquistador’s began to bring enough gold and silver from Mexico and Peru to make Spain the richest country in Europe. Not every ship that left Mexico ladden with gold and silver arrived in Spain, some of them sank. The ships sank from natural causes (storms and reefs) as well as other countries allowed for the capture of Spanish ships as long as the government would take 60% of the gold and silver for itself. The ships had to be armed and the legend of the pirates came into being. When anyone gives shareholders a 10,000% dividend there will be many copies.

In England, 11 outs of the 61 patents issued in England between 1691 and 1693 were for diving bells. The idea being, put the diving bell into the ocean to see if they could find a sunken treasure. If you ever dived in the ocean, after a few feet from the top, the ocean is dark. It is very hard to see and it was not usual for diving bell companies to go bankrupt. Mr. Defoe invested in one of the companies and liked it so much he became treasurer. His company went bankrupt and was sued by the founder.

Another venture was a civet farm. Civets are cats and their anal glands contain an oil substance which can be turned into perfume. The farm was eventually seized for non payment of debts and accountants valued the assets at half the original sale.

Linking to dividend paying stocks, there are a great number of examples of people who had some money and want to be get rich quick to live the status of others, keeping up with the Jones type idea. A matter of fact, depending on where you live, it likely affects your lifestyle and investing style. It is hard to save money to invest if you need to keep up a lifestyle of your neighbors and peers. If you are comfortable, the method to achieve long term wealth is being patience, invest in stocks which are profitable, pay dividends and go up in value overtime. It is very tempting to have some money in the latest trends, but trends change and what goes up comes down if there are no profits, it is just a matter of when.

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

In 2004, for very good reasons the airlines Air France and KLM merged and it was good. Each of the airlines add jobs and economic developments to their countries, but in the background the Dutch thought the French favored their country a little bit more. When COVID happened and airlines were shut down or running on less than 5% capacity all the old rules fell. Any airline running on less than 5% capacity will need a bailout.

According to an article by Toby Sterling and Anthony Deutsch of Reuters, France was the first country to announce a E7 billion or $10.7 billion for Air France in April. The French believed the Dutch government should add funds and after numerous rounds of talks, the Dutch government will add E3.4 billion or $5.2 billion to the package. However, in order to ensure taxpayer money is paid responsibility and mostly on the Dutch side of the business, an observer to the Air France-KLM Group Board of Directors will be appointed.

The French government and the Dutch government each own 14% of the shares. Air France has 45,000 employees while KLM has 30,000. Both airlines are looking for those who can voluntary retire, before laying off workers.

Linking to dividend paying stocks, mergers are part of the process of business, there are very good reasons to gain in size. When the head office is not in the same city, there will be culture difference and city differences. If the company is profitable and many of the difference go on the back burner and can stay there for a long time. When companies are not profitable and cuts are to be made all the difference come to the forefront. When head office are in different countries, political inference is to be expected. Investing in a profitable company tends to avoid most of the differences.

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

The stock market has rallied and when that happens, investment banks have gone to their clients and US public companies sold more than $60 billion in shares in May. In an article by Joshua Franklin by Reuters, the $60 billion was the biggest monthly haul ever.

In March, investment banks sold $4.8 billion sold in March, the lowest monthly total since December 2018. In April the number was $22.3 billion and $65.3 billion in May.

In the debt markets, over $1 trillion has been raised.

Santosh Sreenivasan, head of equity linked capital markets for the Americas at JP Morgan Chase said there has been a host of companies that have been hugely impacted by COVID 19 and have had to recapitalize.

Linking to dividend paying stocks, the government has provided liquidity to the market and stock markets have risen and companies have done the correct thing to raise money through the stock and bond markets. This will help the earnings of the investment bankers.

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

The Labor Department provides weekly jobless claims report on Thursday, it is the most timely data on the economy’s health. The report showed a decline in the number of people receiving unemployment cheques in mid-May. The numbers are still very high, which suggests it could take the economy a long while to rebound as businesses reopen.

In an article by Lucia Mutikani at Reuters, the government has passed a number of bills to help companies and people in the economy, Joel Naroff, chief economist at Naroff Economics in Holland, Penn said, the government is helping people which is good, but the PPP is creating problems with understanding what exactly is happening.

Initial claims for state unemployment benefits fell 323,000 to a seasonally adjusted 2.123 million for the week ended May 23. Claims have been going down since they hit a record 6.867 million in late March, but have not registered less than 2 million since mid March.

Layoffs persist in the insurance, educational services, public administration, transportation and warehousing, agriculture, construction, manufacturing and retail trade industries.

A record 40.767 million people filed claims since March 21.

All the claims show the economy is complicated with full time and part time workers trying to earn a living. While the drop in claims as the economy opens up is good news, it is hard to imagine all those people will be going to work sooner than later.

Linking to dividend paying stocks, the governments have made great strides to keep normalcy in the economy, but no one knows how long it will last or should last, at present there is a debate to see how the government money has flowed through the economy. We will see what kind of political will there is in the mean time, because people are people and there is an election in the fall.

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

In North America, the COVID social distancing met the shutdown of manufacturing plants and we look to Europe what can be the trends in the US. In an article by Jonathan Cable and Leika Kihara of Reuters examined manufacturing in Europe and Asia.

All countries have been shutdown by the COVID 19 virus and the manufacturing bell weather index the IHS Markit Manufacturing Purchasing Managers Index (PMI) was at its lowest in April but has since risen to 39.4 from 33.4. The normal number is somewhere in the 50 mark.

The good news is manufacturing has picked up in relationship to health care and personal protection equipment.

The bad news in relationship to recovery in China is the US is having unease with China’s relationship to Hong Kong and how China communicate its work on COVID. The recovery in the world’s second largest economy is intact but fragile.

Japan’s factory activity shrank at the fastest pace since May, in addition South Korean economy slumped. Taiwan’s manufacturing fell in May, while Vietnam, Malaysia and the Philippines saw PMIs rebound although all below the normal 50 mark threshold.

Linking to dividend paying stocks, when the government opens up the economy we all hope that normal activity resumes but Europe and Asia activity show manufacturing will not rebound quickly. We may hope for a V shaped economy, the reality will be different. As you examine your holdings, think about cash flow and how the company makes profit.

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

In every large city there is an area which caters to luxury items for sale – many years ago when people traveled by horse and buggy, the more expensive form was called carriage, thus the carriage trade. In New York you can think about 5th Avenue, Los Angeles Rodeo Drive, Chicago – The Magnificent Mile,etc. however the mecca is still Milan’s Galleria Vittoria Emanuele II which besides the shops is a beautiful building.

The clothes and fashion items set the standards for the rest of the world. The world’s wealthiest could go to their store in the big city, but they they go to Europe to see the brands first hand. In an article by Silvia Alosisi of Reuters, the absence of big spending travellers from China, the Middle East and the US is a drag on sales – depending on the brand they buy between 35 and 55% of the expected sales. It is doubtful local wealthy people will make up for the sales.

In Europe, there has not been a rush to high end stores, unlike in China and South Korea where stores reopening have posted double digit sales growth, even though some brands increased prices.

Bain and Co expects global sales of high-end (priced) clothing, handbags, jewellery, and cosmetics to fall between 50 and 60% in the second quarter. Given the London stores are not expected to open till June 15, 50% of sales will have vanished.

Linking to dividend paying stocks, in North America we live in a consumer society with fashion or clothes leading consumer spending. The trends come from the high end or carriage trade and filter down to the masses. While on line shopping at Amazon and others is going strong, the going out to the mall or city center to do lunch and shop has changed and sales are down. Will they go back to what it was? maybe? one hopes they go back to some sense of people socializing.

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

If you listen to the President who is a cheerleader for the economy, he expects a V shaped recovery. He says it is because he needs it for re-election, he is a cheerleader for the economy and hopes, he has no idea, or the economy is likely to be more L shaped. It will likely be some of the above, but you can look to other countries to see how they are looking towards their economies recovering.

In an article by Nathan Vanderllippe, the Asian correspondent of the Globe and Mail, the Chinese government planners do not expect economic difficulties to ease any time soon.

China has the ability to move its people into where ever it sees fit, believes the challenges ahead will have never been seen before. Prior to the COVID shutdown, the economy was growing and for the past 20 years, the economy has only been growing. The government will earmark nearly $400 billion for local governments to bolster employment, uphold basic living standards, and support private companies through reductions in rental costs and and subsidies for consumption.

The plans call for $20 billion to put more than 35 million people through vocational skills training in the next 2 years, while expanding the colleges by 2 million.

Government revenues fell by 14.5% in the first 4 months of 2020. Government spending on COVID was $30 billion. Do you believe the numbers from China are higher?

Over 560 million people have no bank savings which is not good for savings and investment says Ding Changfa, a professor of economics at Xiamen University.

Linking to dividend paying stocks, across the world there are huge opportunities and challenges. As you do your investing understand how your companies make a profit. As governments continue to use its monetary and fiscal measures, some of them will benefit dividend paying companies as they pay less fees.

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

Hopefully you remember the situation in Italy in February and March, the singing from the balconies was wonderful, however the government shutdown and the state of the hospitals was very hard to manage. In an article by Angelo Amante and Christiano Corvino of Reuters, they reported the 8 week shutdown left an economy already on its knees laden with more debt and unemployed people. The European Commission expects the Italian economy to shrink nearly 10%.

In times of trouble, people in general tend to buy gold and in Italy, Mr. Barrotta the manager of 3 Compro One gold shops has seen a 50% increase in purchasing of gold in 2 weeks since the Italian economy opened up. The price of gold is up 25% since December.

Italians are also using pawn shops to keep paying the bills. Pawn shops in Italy near the the Plazza Monte di Pieta have been in operations since the 17th Century.

Linking to dividend paying stocks, gold is a bell weather commodity to buy when you feel the world is going no where, there are various means of buying gold – the physical commodity, coins, gold stocks and certificates. If you buy the commodity, it pays no interest or dividends while you wait. You might be correct and might lose out of other opportunities, in investing only time when tell if you made the right decision.

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