For months the average person who collected air miles through the various companies which catered to the travelling business class and public has not been flying. They have used Zoom or one of the other companies because in many cases, if you travel somewhere you have to spend 14 days isolated. When you fly back, you have to be isolated again. COVID has been terrible for hospitality and tourism related businesses. Prior to COVID, every airport in the nation dreamed of being an hub for the airlines because as a hub there were plenty of jobs at the airport. Airports themselves were turned into destination points with shopping, food and hotels. Airports became economic driving areas for cities for jobs and taxes.

One of the issues with COVID is no one knows how long it will last and can things return to normal? In the meantime should airlines, hospitality and tourism facilities be given aid? How much aid should be given and would it be easier to give all citizens discounted seats to travel when normal has returned?

The airlines were given $25 billion plus low interest loans of $25 billion. The airlines have used the money and need more. The airlines had kept people on the payroll but since has furloughed 32,000 workers. Should the airlines receive more money?

In an article by David Koeing of the Associated Press, he spoke to Nicholas Calio who is the president and CEO of A4A (Airlines for America) a trade group representing the largest US passenger and cargo airlines.

If you go back to March, all the A4A members were considered to have fortress balance sheets that were designed to withstand an event 3 times worse than 9/11. In the past decade the passenger airlines spent $424 billion on their work force; $143 billion of their fleet; they retired $91 in debt; and returned $56 billion to shareholders (in dividends and share buybacks).

The companies were in good shape and then traffic fell to less than 10% capacity. Traditionally the peak travelling periods are Thanksgiving and Christmas.

An issue for all airlines is people need to be constantly recertified and retrained which is a process. The airlines can not open up quickly but it is important to note the airlines will not be declaring Chapter 11 bankruptcy because they have strong liquidity in their balance sheets. They need help.

Prior to COVID, airlines were having record years and 2019 was a record year. Airlines will start slowly and build when people can fly. What should the government do?

Linking to dividend paying stocks, the companies were in many portfolios do you still own one or more? There were very good reasons for owning airlines in 2019, there are less reasons now. Markets change and can rebound which is why with airlines you ask are you going to fly soon? if not find alternatives.

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

In every market there are opportunities, that is a wonderful thing to remember. In markets such as we see those with cash or assess to credit have many choices including bulking up or gaining size. One such company is Morgan Stanley. For generations, Morgan Stanley was a Wall Street bank which catered to corporate clients and did some wealth business. That was a good business, but Chief Executive James Gorman wanted to ensure there is steady income from global wealth management.

In an article by Niket Nishant and Matt Scuffham of Reuters, Morgan Stanley agreed to buy Eaton Vance Corp for $7 billion in a cash and stock deal. Eaton Vance shareholders will receive $28.25 a share and 0.5833 Morgan Stanley shares for each share they hold. They will also receive a one time $4.25 dividend paid by Eaton Vance before the deal closes. It is expected to close in 2nd quarter of 2021.

With the merger, Morgan Stanley’s wealth and investment management businesses which account for 40 to 50% of the bank’s revenue. Adding Eaton Vance increases assets under administration (AUM) from $665 billion to $1.2 trillion and will boost the business’s annual revenue by about 1/3.

Barclays analyst Jason Goldberg said Morgan Stanley will help distribute funds to the retail investor since Eaton Vance is the top US distributor of individual separate accounts. CEO Gorman has a reputation of acquiring growth and finding efficiencies to bolster profits. When Mr. Gorman acquired Smith Barney the profit margin went from the single digits to 25 to 30% margins. The last acquisition was E*Trade.

Linking to dividend paying stocks, the wealth management business is expected to come to grow and Morgan Stanley is a very good position to enjoy profits from it. When the banks collapsed in 2008, Morgan Stanley has been a good position to hold and given the size of AUM and fees from that group, it should remain a good position.

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

On the surface, President Trump is more biased towards Wall Street, however Joe Biden is from Delaware. On of the attributes of the state of Delaware is low corporate taxes for companies nominally headquarter in Delaware. Many New York companies are technically headquartered in Delaware for the low taxes. Do you believe someone who has represented the state for years is going to be bad for Wall Street. What he will tend to do is reign in some of the excesses and bring a fairness to corporations and what they do and do not do, but expect good relationships with Wall Street.

If the polls are correct and they were closer than expected, but the Democrats remembered electoral college math and President-elect Joe Biden will take over President in January 2021 and investors will vote with their check books as opposed to voting to take advantage of democracy.

In an article by Matt Phillips of the New York Times News Service, if the Democrats win there will be more regulation and taxes. Some of the regulation is needed because the Trump administration has move the pendulum too far and took away too many regulations. Taxes on corporations will go up to 28% from 21% and more taxes for those earning above $400,000. It must be remember that when taxes were cut, many Wall Street companies bought back more stock and gave larger dividends as opposed to reinvesting in the business. The tax cuts were seen as a one time bonus.

Analysts at JPMorgan Chase & Co examined what companies on the surface should be winners and who will be losers given the biases of Biden. The winners tend to be health care, renewable energy, infrastructure and better trade relations with China (Jim Cramer on Mad Money agrees with the China). Potential losers could be companies with large numbers of minimum wage workers (although the federal government does not employ many people Biden believes the minimum wage should be $15.00 a hour), defence contractors (the defence budget will likely be cut), energy companies (due to climate change and higher demands of fuel efficiencies).

The higher the win, the cleaner the outcome and Wall Street likes certainities.

Linking to dividend paying stocks, companies love to say they want independence from the government then when competition happens they want a level playing field which means playing by the same rules and ensuring the bigger company keeps making money. As long as your investment in the companies can still make money that is your first concern. Under the Trump administration it was much easier to do many corporate activities or the bias was towards the company. Under the Biden administration there will tend to be more emphasis on is the corporate activity helpful to the consumer and employee? There will be a shift but good companies with strong values which consistently make money will continue to make profits.

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

If you read a newspaper or watch TV, some of the content in the news will invariably be about how changes are affecting their business. Sometimes the idea is if it affects the media business, then it affects other businesses. Some of that is true, some of it is not, but if you are in the media world, you have a bias towards media business. It is the same for whatever industry a person works in, a person in the business will tend to know the other players and roughly who is profitable and who is not.

Not long after the invention of the printing press, the news has been a profitable business because people are naturally interested which translates into advertisers wanting and needing to reach the people particularly if the item is to the general public. If you want more targeted audiences start with the specific industry magazines and trade association papers.

Along came the internet and people began to switch from the daily papers to news from the internet whether it be Google or Facebook or other companies as people switched so did advertising dollars. Now days advertisers first think of the internet, then to newspapers. When newspapers were very profitable, the owners also enjoyed a high level of connection to the leadership of the country and businesses. For a long time, the owners have been reaching out to the government for a solution.

In France, the courts are used to advance the case of the publishers. Recently, the appeals court in France ruled that Google must open talks with publishers in France about paying to use their content.

In an article by Mathieu Roseman of Reuters, the ruling means Google must meet with Publishers and News Agencies to find a way to remunerate (give money) to them under the “neighbouring right” enshrined in revamped U copyright rules, which allows publishers to demand a fee from online platforms showing news snippets.

For a number of years, Google and others published articles from the newspapers in their news feeds without paying, but referencing the news feed.

The French court differs from Google’s pledge to pay $1 billion to publishers globally over the next 3 years for their news. Google said they hope to reach an agreement with the French publishers for their news. The French courts confirms a decision in April by France’s competition authority, which ordered Google to negotiate with publishers and news agencies “the remuneration due to them for any re-use of protected content.”

Linking to dividend paying stocks, with all profitable companies they build up goodwill in the eyes of legislators and various decision makers. Whether the goodwill is valid, is not a concern, goodwill for doing business and being profitable happens. This lead to the ability to have multiple avenues to charge off competition if the competition is too tough, including protection of the known and not positive of the changes that could happen. In the case above, the Publishers have changed copyright rules and now expect to be profitable or have a better cashflow from their media outlets. When a company is profitable there are more options to defend itself, including being the best in class.

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

Foreign relations can be a tricky subject particularly if a country does not have a strong leader. If the country has a strong leader, then other countries can either support or try not to support them, but at least the other countries know who they are dealing with. In the case of Venezuela, there are 2 different people who believe they should be President – Nicolas Maduro and Juan Guaido. There was an election and Mr. Maduro said he won and is President at the moment. Mr. Guaido says the election was not fair so he should have won and for various reasons countries around the world have picked sides.

The economy of Venezuela was based on heavy oil and oil, but prices are down so the heavy oil production loses money and the economy of the country went down hill. When times were good the country imported 90% of what they consumed. With the drop in oil prices, all the prices which were subsidized have gone up, but people’s income have gone down.

As a country, Venezuela has assets and according to an article by Paul Waldie in May 2019, the Central Bank of Venezuela moved to cash in a gold swap contract it had with Deutsche Bank in London. The contract was secured by $1.95 billion worth of gold held at the Bank of England. The Venezuelans wanted payment.

This is where politics gets in the way, Mr. Guaido’s group said he won the election and demanded the gold remain in Britain. The Bank of England looked to the government and decided let the case end up in court, which is a good delaying tactic.

Last summer, the court noted the British government supports Mr. Guaido and the gold stays. The Venezuelan Central Bank appealed the ruling to a higher court and said while the British government supports Mr. Guaido it also supported maintaining diplomatic relations with the Maduro government. Similar to most countries, sitting on the fence and supporting both side is a good strategy.

Mr. Maduro said the money will go to fight the COVID costs, but Mr. Guaido believes the money will end up in someone’s bank account. An appeal to the Supreme Court of Britain will be done.

Linking to dividend paying stocks, one of the wonderful aspects of a profitable company is they have assets which can be divided up. When things go wrong financially for any company or country, examining the assets is top of the lists. As long as the company is profitable, few will complain whether the money should go to shareholders or be reinvested in the company and that is a good thing.

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

Prior to the election, President Trump communicated to the American public differently than the previous Presidents, the President tweeted a great deal. The former Presidents and maybe the new President Joe Biden used more formal communication methods – through the White House communications department. President Trump believed he was closer to the public by tweeting, but for the officials who sort out the details, Twitter messages had many fires to stop and occasionally sent markets up and down.

One example was the stimulus bill. In an article by Doina Chiacu and Richard Cowan of Reuters, President Trump in a tweet called off negotiations for the stimulus bill. The President wrote at my instructions, my representatives have stopped negotiation until after the election. The President wrote after the election we will pass a stimulus bill which focuses on hard working Americans and Small Business.

One might not think waiting another month for people who source of income is drying up is a good idea, but the President can negotiate the way he feels is best.

Wall Street analysts job is to determine what affect the action or inaction would have on the economy and the easy conclusion is spending would slow. The economy of the US depends on consumer spending and if people are concerned about when the next government assistance will come in, they will prioritize to housing, food, transportation and bills. The expenditures will have to wait.

The real reason why the stimulus bill is taking so long was a different idea of whether the economy should be wide open or closed. In some states the idea was to be open, in other states open a little and other states where COVID is higher closed down. If the economy is closed, then people can not meet in groups and many industries depend on people gathering. If people can not gather then some form of stimulus is needed.

Linking to dividend paying stocks, what the President says and does not say matters to analysts. In the form of open communication means everyone can see the information and determine if it is good, bad or neutral and adjust to your determination. One hopes that the President can see both the short and long term as you invest.

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

The election has happened and now the tough part of governing needs to happen, ensuring the economy moves upwards for the greatest number of people. With the election, companies all over the nation will be cost cutting until what was normal has returned.

In an article by Neil Irwin of the New York Times News Service, do not expect a V shaped recovery, it will be a slower recovery, why sectors that in theory should not be much affected by the pandemic at all are showing patterns akin to a severe recession.

There were many companies who kept workers on because of the government help, those programs are ending and the layoffs start. Even in head office, the term is management of companies and enterprises the 3.9% decrease is higher than the 2.4% drop during the 2008 recession.

Compounding the problem is as in all recessions, the shifts that were happening already have been accelerating. This means when the economy does get back to full health, many jobs will no longer exist and many other workers will need to find other types of work. Historically those adjustments take time (one hopes the government in charge is helpful to the shift, rather than expecting people to do it themselves).

Sofia Koropeckj, an economist at Moody’s Analytics expects there to be a steady state but not until 2023 or 2024. It is expected upwards of 5 million people will have troubles because their jobs disappeared or have changed significantly.

An example is Herron Printing & Graphics based in Gaithersburg, Maryland. The company produces a number of items or trinkets companies give out at trade shows, which are presently not being held. The company produces restraurants menus, which have a low demand, because menus are on line. The company produces note pads you would pick up in a hotel, which few are staying at. Business is down 90%. Randy Herron is President of the National Print Owners Association. If they are not printing, then no new software or equipment is needed.

Trucking is a large business employing thousands of workers. The industry is working below February levels with employment down 5% and trucking tonnage down by 9%. The industry is not buying new trucks.

Buying a new vehicle and truck employment levels have changed because more and more people research the vehicles on line first. When they go to a dealership it is for a test drive. The price haggling is done on line, which allows consumers move choice to find alternatives.

In every recession, the recession starts in one sector and then moves outwards. In 2008 the recession was housing prices went down; the 2001 recession was the price of dot.com companies declining. The recession starts in a sector and then rolls into others and millions of people begin to lose their jobs. The challenge for the administration is not to prevent the structural changes, it is to ensure new jobs are being created and the pain is short-lived. The past 2 recessions had jobless recoveries which took years for the process to play out. What will happen now?

Linking to dividend paying stocks, these companies tend to be leaders in their field and from an investment point of view that is great. They are also well and need to do cost cutting which affects people which is not so good. Governments have a role (the idea of Andrew Wang and the $1,000 a month dividend sounds very good to bring the economy back). what will the government do?

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

If you were to be asked what is the second biggest fashion retailer, what company would you say? The biggest is Spanish company Zara which reported a return to profit in May-July quarter. The second largest is Swedish company H&M.

In an article by Anna Ringstrom of Reuters, Chief executive Helena Hellmersson said although the challenges are far from over, we believe the worst is behind us and we are well placed to come out of the crisis stronger. The company has expanded its network of shops around the world, will aim to cut their number by a net of 250 or 5% of the stores in their current network. The chain has 5,000 stores.

The company said sales in the stores has continue to recovery and reported a smaller than expected drop in third quarter profit.

Analysts at JPM it a note said, H&M has improved the quality of the H&M business model and infrastructure and the turnaround is still very much well on track.

The company is expected to make 2.37 billion crowns (or $352.8 million).

Linking to dividend paying stocks, all companies had to ensure their inventory levels are well managed. There is a process to all retail companies – the item comes in at full price for a month or so, then seasons begin to change and sales happen and then larger profit mark downs occur then the items are sent to other retailers to send at or near costs. Managing inventory and ensuring customers receive what they want, when they want is a challenge which keeps people in the retail world. How does your company manage their inventory?

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

When you buy a dividend paying company, it often has production facilities in multiple locations, this is good for diversification. It is also good when companies play off each municipality and state to receive the most grants or forgivable loans or industrial bonds or other incentives municipalities and states can offer. All companies were started somewhere so that is their historical home, but many other the years move to other areas. In the case of Boeing, the company was founded in the Seattle area, the corporate headquarters a few years ago was moved to Chicago and the company established a plant in South Carolina in 2012.

In an article by Eric M Johnson of Reuters, the company examined their costs, decided on a cost-cutting strategy to move operations for the Dreamliner or the Boeing 787 production from Seattle to North Charleston, South Carolina. It was good news for one city, bad news for another. The company said, the single site would improve operational efficiency as the US plane maker adjusts to the market downturn and positions itself for recovery.

If the idea of union and non union workforces played a role, it might have. Seattle is unionized, the union tried to organize the South Carolina plant but was unsuccessful.

In Washington State and in Seattle, politicians took out their “swords” and called the move an insult to the workers who work there and would examine the company’s favorable tax treatment.

The labor force in South Carolina maybe less expensive, but for Boeing to increase production to the 10 or 11 planes a month will mean a significant investment in the South Carolina facility.

Linking to dividend paying stocks, all large companies will go through a similar type of decision making process when it comes to cost cutting. One facility will benefit while another will not. One hopes the remaining plant location was enough diversified that people will do other things. However with every production facility an infrastructure develops to help train and support those jobs. From the community colleges and universities to retraining facilities to supplier jobs in the community. What decisions will they make? When profits are being made, all can be good with the company. When the company enters a cost cutting program, the benefits are to the company not the community.

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