If you have a smart phone after making a few calls, entertainment is what you seek. Entertainment is a variety of methods but consider of the 2.5 billion Facebook monthly users, 700 million of the are engage with gaming content. Perhaps you are one of them, if you are not and that is good, you should know the global games business is worth $160 billion.

In an article by Seth Schiesel of the New York Times News Service, his discussions with Facebook noted the company was planning to introduce the app in June, but moved production up sooner. Mark Zuckerberg says gaming is entertainment that not just a form of passive consumption but entertainment that is interactive and brings people together. (if you ever went to Las Vegas – do you think gambling brought people together?)

Facebook’s app is designed largely for creating and watching live game-play, a fast growing online sector whose competition is Amazon’s Twitch; Google’s YouTube and Microsoft’s Mixer. In terms of total hours watched Facebook is behind YouTube and Twitch. The market leader is Amazon’s Twitch.

Linking to dividend paying stocks, if you are similar to me you have learnt about stool in Amazon’s revenue source – delivery of boxes with Amazon Prime; cloud computing (market leader) and Twitch. There is always things to learn, and hopefully you continue to learn during the pandemic and beyond.

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

In the retail market there are a wide variety of shops and some you will like and have shopped at. Most will be under pressure because of the virus. The virus stoppage means the retail stores have inventory or stuff in the store that likely no one wants to pay full price. The retail stores follow the seasons and need to sell their inventory for the next season. When the stores open there will be great sales for stuff that is for 2021, not necessarily for 2020. It is very hard to be a retailer right now.

Prior to the virus, the retail market was changing and some of the biggest names were in trouble, now it is more so. One of the big names is the Neiman Marcus Group founded in Dallas in 1907. The store became a national chain and in 2013 there was a leveraged buyout by Ares Management and Canada Pension Plan Investment Board. The chain owes $4.8 billion from a $6 billion buyout.

According to an article by Mike Spector and Jessica Dinapoli of Reuters, Neiman Marcus skipped millions of dollars in debt payment in mid April. Other department stores such as Macy’s and Nordstorm were borrowing money to stay afloat while JC Penny is considering bankruptcy filings to rework its unsustainable finances and save money on looming debt payments.

Standard & Poor which rates debt noted Neiman Marcus’s capital structure is unsustainable and move the rating into junk category.

Linking to dividend paying stocks, when you look at the big chains, you might think they are back by great real estate assets, but has the market changed forever or will it go back to normal. What can the mall stores be used for, it is a higher paying rent? Those are great questions which we will find out, if you want to invest in retail stores ensure they own the space not lease it for low rates. Do your homework or you will lose money. The investors first rule is try not to lose money.

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

How much money will US banks lose on loans because of the coronavirus recession?

After 2008 and throughout the 2010-2019, US banks had become more vibrant and had excess capital requirements required by the regulators. The banks were in great shape, the economy was growing, loan losses were down and bank earnings were expected to grow 2%. How a month or two has changed everything, in an article by David Henry of Reuters, losses are expected to be from 14 to 42%.

There are two variables for the change, one is the virus and to fight the virus the need for social distancing which has increased jobless into the 20 million numbers plus. The second is internal to the bank – accounting standards that require the banks to estimate losses for the lifetime of loans and set money aside to cover them. The 4 largest banks JPMorgan Chase, Bank of America, Citigroup and Wells Fargo reported a combined $24 billion in provisions for credit losses, which is 350% more than a year ago.

The projections are unknown because there are many assumptions in the figures – how long does the bank expect the recession to last; while the government stimulus will pay basic costs of rent and food, what about the bank loans? What does their Artificial Intelligence programs tell the banks?

Linking to dividend paying stocks, the banks have been great to hold and for the most part should be part of a diversified portfolio. We all do not know what the economy will look like in June, because shopping and going to bars and restaurants involves social interaction not social distancing.

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

In a normal year, the most important shopping day is what is called Back Friday or the day after Thanksgiving. What happens is people stop, get together with family and have little to do so the next day they go shopping. One can wonder what people are doing now – yes there is internet shopping with Amazon and Shopify but it is not the same.

In an article by Lucia Mutikani of Reuters US retail sales suffered a record drop in March and output at factories declined by the most since 1946. The good reason for the declines is the social distancing to fight the virus. One has to remember, in a service economy and having some of the biggest malls in the world, shopping is a normal thing for most Americans.

The dollar drop of 8% drop in retail sales is $46.2 billion. Auto sales were down 25.6%, gasoline prices while dropping to lowest levels in years sales were down 17.2%. If we are all at home, few people are driving.

Sales at clothing stores were down 50.5%, furniture stores down at 26.8% and spending at sporting goods, hobby, musical instruments and book stores down 23.3%. Sales at electronics and appliance stores decreased 15.1%.

Sales at restaurants and bars dropped 26.5%.

What was up – grocery stores went up 26.9% as more people made their own meals; health care is up 4.3%, building material stores were up 1.3%.

Linking to dividend paying stocks, when the pandemic eases what will you spend money on, besides bills? what about your friends and family? If you said clothes then one would expect others to do the same and maybe retail has an opportunity. However, we went in the shutdown with stores having inventory of winter stuff and starting to bring out the spring collection. The summer collection is shorts and less clothes. Do you believe the stores make a great deal of markup on the summer collection? When the economy does open up , what will be the v shape in sales and what will be lagging indicators?

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

Since the shutdown because of the coronavirus, one of the areas which remained open for consumers was the grocery stores. The first couple of weeks, there was a run on the stores, but supply chains adapted. When you consider the grocery stores, you have to consider supply systems – normally there are two an institutional component and a store component. The institutional supply is designed for high volumes so they do not need 12 eggs carton, they need 30 egg cartons. You can go through the other sections, or at some grocery stores they cater to the wholesale market and you can see the larger sizes. Most of us who shop in the consumer stores would never need that much product, for the shelf life when opened would mean we would have to throw things away. The shutdown has meant the institutional side of the business had to adapt to the consumer side of the business and it has not been easy, which is why the experts will tell you there is plenty of food, just not in the right package.

All supermarket chains are selling more product because everyone needs to eat and they have been cooking at home more. This means one of the few places a reasonably healthy person can go is the supermaket, which is good for the supermarket.

Scott Clayton of the TSI Network and associate editor of TSI Dividend Advisor examined top supermarkets in Canada and the US which offer high sales, expanded online sales, and dividends.

TSI Dividend System awards a point system:

1 point for 5 years of continuous dividend payments, 2 points for more than 5 years

2 points if the company has raised the payment in the past 5 years

1 point for management’s commitment to dividends

1 point for operating in non-cyclical industries

1 point for limited exposure to foreign currency rates and freedom from political interference

2 points for long term record of positive earnings and cash flow sufficient to cover dividend payments

1 point for an industry leader

Companies with 10 -12 points have the most secure dividends

7-9 above average

4-6 average

1-3 below average

Company Div Sustain Points Mkt Cap Div 1 Yr Return Recent

Rating $ bil Yld % % Price $

Kroger Highest 10 25.0 2.0 25.8 32.03

Walmart Highest 10 365.4 1.7 25.6 128.76

Loblaw Highest 10 26.4 1.7 10.0 72.83

Metro Highest 10 15.1 1.5 17.9 59.83

Costco Highest 10 138.7 0.8 26.0 310.27

Linking to dividend paying stocks, when you examine the list TSI makes most of the points are not highly embedded in the Annual Report, you can easily determine the points without being a math person. Every company which pays a dividend has a list on its web pages under investor and says what the dividends which were paid. You can see if the numbers are going up or not, in the President’s message you can read if they are committed to the dividend. The idea of any investing is trying to make it easy for you to determine if you should hold or not. If the answer is yes, then you do not have to do anything till the next year. Let your dividends come in.

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

Before the pandemic arrived, many people were dependent on tech companies to get around and get together. The companies became well known in the normal day so much Uber, Lyft and Airbnb was all you had to say and go the app on your phone. What has happened to them?

In an article by Barbara Ortutay, Dee-Ann Durbin and Michael Liedtke of the Associated Press, the companies were examined to see if they still are important as we all stay home or close to home. In the middle of April, Uber was down 25%, Lyft was down 28% and Airbnb and WeWork valuations were no where near what they were before.

Allen Adamson co-founder of Metaforce and a business professor at New York University noted with the market pressure will mean for all companies is the survival of the fittest. If they were going into the storm in bad shape, they will be in worse shape coming out.

Airbnb agreed to pay hosts $250 million for make up for some of the money lost to cancellations. AirDNA a data firm which helps property owners set rental rates, says the impact has been mixed. In New York City, bookings dropped 66%, but in the outer suburbs they were up as people left the city.

Two private equity firms – Silver Lake and 6th Street Partners invested $1 billion in debt and equity into the company as the expect Airbnb to emerge from the crisis in a stronger position.

Uber is to trying to reassure jittery investors than its aggressive expansion remains on track. Both Uber and Lyft are trying to preserve cash in part by emphasizing deliveries of food and other goods. Uber expects to end 2020 with $4 billion in cash or burning through $7 billion in 2020. On the driver side, even though drivers are delivering food, business is down 80%.

Companies that have benefited include Zoom Video Communications which has seen new highs and Blue Apron which was almost delisted, but revenues have increased as orders sharply increased.

Linking to dividend paying stocks, none of the above companies pay a dividend, for they are in the disruption phase in their industry. Hopefully by the end of May, companies can return to doing what they did before. It is important to notice companies which disrupt because they are linked to other companies. Before Airbnb, the choice was Bed and Breakfast or Hotels. Real estate was usually good for dividends, with the pandemic things look a little different depending on how long it lasts.

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

Before the coronavirus, Boeing was finally fixing the problem it had with the Max737 and production was likely to begin. Then came the virus which has essentially shut down the aviation industry. Not many people flying. What should the government do?

In an article by Natalie Kitroeff and Kenneth P Vogel of the New York Times News Service, the issue of Boeing is complex. Boeing is the largest aerospace company in the US and is the second largest military contractor. With its various operations it was seeking funding in at least 3 of the federal assistance programs established by the $2 trillion coronavirus relief package. At first, the company said it would not apply, however a day passed and the company is in talks with Washington to receive money. Most taxpayers are hoping the money comes with some strings attached.

If production of the Max 737 is started again, Boeing would employ more than 150,000 direct workers and more than 1 million through the supply system chains. For a company which said it would not take money, Boeing has hired 2 New York investment banks – Lazard and Evercore to advise them how to get money from the Treasury or through the stimulus program. Boeing’s lobbyists in Washington has been regularly consulting the Treasury department.

Linking to dividend paying stocks, the advantages companies that typically make profits is the eco system attached to Washington and state capitals to ensure there is government assistance when needed. The Board of Directors will have a number of options to receive money.

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

If you have been asked to stay at home either to work or apply for government money, you have not been driving. If you have been driving, you will notice driving in the cities is very similar to the biggest holiday of the year – it is easy to drive. HUD Secretary Ben Carson said his normal drive of 40 minutes to downtown Washington takes 10 to 15 minutes. In countries around the world, similar conditions exist which means fewer people are buying gasoline.

At the same time, Saudi Arabia and Russia decided to increase production to push down the price of oil to increase pressure on US oil shale producers. The only thing which resulted from the feud was in the world of supply and demand, supply increased, demand fell and prices fell.

President Trump did not like the low oil price, at least he talked about it during his daily virus updates and finally Saudi and Russia will curtail output through May and June by 10 million barrels a day from precrash levels In an article by Jeffery Jones and Marieke Walsh of the Globe noted the deal did not appear to be contingent on countries outside the OPEC fold including Canada and the US imposing more cuts on their industries.

Linking to dividend paying companies, if your investments are tied to commodities they are tied to supply and demand curves. Ideally you want companies that have the ability to raise prices no matter the demand.

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

When States and the US government recommended shut down of companies because of the coronavirus pandemic, many companies did and have and that is good for public health. One of the issues of companies is do they proceed with stock buybacks and pay dividends as they laid off workers. Some of the biggest companies in the tourism business – Royal Caribbean Cruises Ltd, Haliburton Co, General Motors and McDonald’s Corp all have laid staff, cut their hours or slashed salaries while maintaining their policies despite the economic pain.

In an article Ross Kerber, Alwyn Scott, Jessica Dinapoli, and Rebecca Spalding of Reuters noted Royal Caribbean which has halted its cruises in response has borrowed to boost its liquidity to more than $3.6 billion said it began laying off contract workers in mid March, although the moves did not affect its full time employees. The company has not suspended its remaining $600 million share buyback program or its dividend which totaled $602 million last year and is set quarterly.

Royal Caribbean noted we continue to take decisive actions to protect financial and liquidity positions. Royal Caribbean’s rival Carnival Corp has laid off contract workers, it has suspended dividends and buybacks and raised more than $6 billion in capital markets. (a Saudi investment company has bought 8% of the stock).

Goldman Sachs analysts forecast that S&P 500 companies would cut dividends in 2020 by an average of 50% because of the fallout from the coronavirus pandemic.

If a company receives US government under a $2.3 trillion stimulus package are obliged to suspend share buybacks. Layoffs ending March topped 6.6%. It will go higher in April.

Critics say companies should cut shareholders, before letting workers go.

McDonald’s suspended buybacks, but maintaining its annual dividend of $3.6 billion. McDonald’s said staffing was done by franchise operators but not corporate office. The pr department said it was not making a choice between employees and dividends.

GM has halted normal production (it is a little hard to buy vehicles while stay at home restrictions are in place; GM paid its first quarter dividend on March 20 and has a month to decide to declare paying its next dividend.

Halliburton laid off 3,500 workers in its Houston office. The company cited the virus and lower oil prices as the reason for the layoffs. In March, it paid its 1st quarter dividend to shareholders as planned.

Large asset managers BlackRock and Vanguard have cited managing human capital as a priority for companies they invest in. Yet they have been silent.

Linking to dividend paying stocks, investors are biased for both shareholder buyouts and dividends. While we want companies to ensure they have ample liquidity for a wide variety of scenarios and implement austerity measures to preserve cash or at least say what GM said it was doing. The bias is to pay dividends unless the companies believe the change is going to last a long time.

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