In an interdependent world, not all countries are equal but the rich countries try to help the poorer ones through institutions such as the World Bank and the International Monetary Fund or IMF. These institutions lend money to some of the poorest countries in the world, sometimes there is a kicker that they have to buy products from a richer country, but when a country is poor, what choices are there?

Along comes the virus which all countries shut their border to people, one has to remember the biggest export of a poor country will be its people who send money back home to their families and relatives. The countries typically have little resources or if they do have a resource it is tied to the commodity prices which go up and down depending on the world’s economy. Prior to the virus shutdown, the countries had a weak health system, high debt levels and few resources to manage both. With the virus what does a poor country do?

According to an article by Andrea Shalal of Reuters, IMF managing director Kristalina Georgieva said the IMF was going to revise its forecast that the global output would shrink by 3% in 2020 and developing countries would need more than $2.5 trillion to weather the storm.

At the moment, the IMF is going to cover the debt service payments of 25 of the poorest countries for 6 months. The IMF said further assistance was likely needed, but if it cancelled debt payments the IMF’s credit rating and ability to provide low cost funding would be harmed.

Linking to dividend paying stocks, the reasons why the countries are in trouble are always multiple but you can easily apply the same logic to the poorest citizens in your country. Should they be helped? how do you help? what does that mean? When you bring the analysis to companies focus on cash flow – how do they receive it? how much are they getting? is it enough?

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

At the present time interest rates are very very very low, however some of the best companies to invest in have little debt and solid balance sheets to grow through all cycles of the economy. In a chart by Emily Halverson-Duncan of Morningstar Research, she looked through the company’s data base at 2,092 stocks and came up with the top 15.

debt to equity ratio less than or equal to 1.1

debt to total assets ratio in the lower 2/3 of its peers, this chart is 0.4 or lower

cash flow to debt in the top 2/3 of its peers in this chart it is 0.27 or higher

market capitalization in the top 2/3 of its peers, it this chart it is 1.3 billion or higher

trailing ROE in the top 1/3 of peer, the value is 16.9% or higher

5 year beat of less than 1.3

The companies which are in the list are:

Company Mkt Cap Debt/ Debt/ CF/ Trailing 5 Yr Div Recent

($ bil) Equity T Assets Debt ROE% Beta Yld Price

NetEase.com 46.032 0.0 0.0 0.0 23.3 0.7 1.9 359.77

Take-Two Interact 14.728 0.1 0.0 6.1 24.2 0.5 0.0 129.85

Logitech Internat 8.597 0.0 0.0 18.2 29.4 1.0 1.4 51.39

CommVault Systems 2.094 0.0 0.0 10.4 20.1 0.8 0.0 44.95

Veeva Systems 28.708 0.0 0.0 9.6 22.3 0.9 0.0 192.34

National Beverage 2.423 0.1 0.1 4.1 32.9 1.1 0.0 51.98

WD-40 Co 2.393 0.5 0.2 1.0 36.5 -0.1 1.5 175.11

Intuit Inc 73.030 0.2 0.1 3.5 50.8 1.0 0.8 280.36

Biogen 51.244 0.4 0.2 1.3 48.4 0.5 0.0 314.02

Cadence Design 23.021 0.2 0.1 2.2 36.9 1.1 0.0 82.46

the other companies on the list are:

Accenture, Paychex, VMware Inc, Lululemon Athetica and Copart

Linking to dividend paying stocks. the world is awash in inexpensive debt but some companies do not need the debt financing, they generate enough cash flow not to have debt. Notice some of the companies are in the software business but they are not household names. This is why these lists help you decide what is important in your investing decisions.

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

If you are similar to those in the north east, we have finally received warm weather on a constant basis and have a desire to live outdoors. Part of the outdoor experience with kids is going to an amusement park at least once during the summer. The closer you live, the more inviting is the season pass. With the virus all parks are closed, but there is hope for North American parks.

In an article by Sam McNeil of Reuters the Shanghai Disneyland reopened. In early May when the article was written, Disney was limiting visitors, requiring masks and checking everyone for their temperature. The good news for Disney was the opening was sold out, however that meant normal capacity is 80,000 people per day, Disney had cut that to 30% or 24.000 people.

If you look at the virus controls, the industry with the biggest effect is tourism and there are many people with jobs in tourism field. When you think of Disney – you might think of an entertainment juggernaut with movies – from Disney cartoons, pictures, Marvel movies, but they said its quarterly profit went down 91%. Tourism and the gathering of people helps make Disney money.

Linking to dividend paying stocks, we are all adjusting to the virus and it takes time but as investors it is important to continually ask how does your company make profits. Then you can go through different risk scenarios of can they continue through different cycles, if the answer is yes, the price of the shares will go up and down, but if profits are made and dividends paid you have to do little but ensure they are added to your account. There will be many companies not doing well in the summer, but with your dividends you can look for opportunities because somewhere there is always a bull market which you can take advantage of.

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

When governments around the world told people to stay home and many did, the immediate effect was to take cars off the road which made driving easier. The cars off the road resulted in demand for gasoline to drastically fall which made prices fall and add a supply war between Russia and Saudi Arabia has meant all energy companies shares have declined. The question for investors is as restrictions are taken off and demand for gasoline goes up, which companies benefit. Should you buy the an index stock similar to Energy Select Sector SPDR Fund which is down 36% or buy individual companies? Are there any companies benefiting from low oil prices? Gary Christie who works Trading Central offered some names who are benefiting.

He started with S&P 500 energy companies with a minimum market capitalization of $1 billion.

He looked for energy stocks with a P/E ratio less than the S&P 500 (19.7) to find undervalued companies

Cash flow is important, it needs to be positive (last quarter versus Prior Year)

Operating margins of 10% or more. (how much profit does the company make on each dollar of core revenue?)

He included dividend yield, year to date performances (they were all negative), the 1 year performance and recent price.

Company Mkt Cap P/E Div CF Growth Oper 1 Yr Recent

($ Bil) Yld % Margin Pref Price

TC Energy 44.7 15.1 4.9 104.6 45.3 0.7 47.00

Frontline Ltd 1.5 9.5 6.7 161.2 24.7 -6.1 7.56

Euronav NV 2.2 18.5 6.0 71.5 19.4 2.1 9.89

Cdn Nat Resources 18.3 4.7 7.9 37.6 22.9 -45.6 15.47

Enbridge 65.6 16.4 7.9 6.1 17.3 -16.7 32.45

ONEOK Inc 12.5 14.9 12.7 n/a 20.7 -56.6 30.29

Valvoline Inc 31.9 13.6 2.8 63.6 15.5 -10.0 16.97

EOG Resources 28.2 9.7 3.3 30.4 23.9 -45.3 48.42

Cactus Inc 1.2 9.5 2.4 161.6 28.2 -57.7 16.28

The importance of charts such as these is there are always companies that make money during any cycle of the economy. Some of the above are pipeline companies, the energy area is oversold which was done for very good reasons. At some point the energy companies will perform better, it is good to know which ones should do better. For the decade it was possible to pick a variety of companies working in the oil shale parts and the stock to go up. Now you have to be more narrowly focused, but as you see more vehicles on the road including commuting and driving across the country, demand for gas will increase which means some companies are making more money.

Linking to dividend paying stocks, just because it pays a dividend does not mean the price will fall, in the oil industry we have seen 50% decreases which helped push yields up and the question is the yield sustainable? As the price of the shares increase, the yield falls. Cash flow and operating margin help you determine if the dividend is sustainable and whether to hold, buy or sell (fold). Kenny Rodgers song the Gambler did sum it up.

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

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When governments around the world order we all have to social distance and many tourism and entertainment facilities were shut down because they help bring people together, also included in the list is restaurants and airlines. There were and are very good reasons to do so, because the virus spread is slowed and stopped for a period of time when medical companies can find a fix.

In an article by Christoper Rugaber of Reuters, it turns out what is wonderful public health fix is a terrible economic fix and reality is coming back. Every in the restaurant industry discusses number of times the restaurant can turn over, adding patios to double seating, what is the minimum space between patrons. All those numbers are turned upside down when discussing reality and social distancing. The average restaurant needs 60% capacity, if social distancing means 33%, how many bodies are needed to serve the patrons?

Of the 20.5 million people who lost jobs, over 80% stated their loss as temporary. The majority of people working work for small and medium sized businesses and they will not be fully staffed when it comes time to open. As time goes by, more layoffs become permanent, the recovery will be slower and unemployment is going to rise.

Compounding the problem is who is temporary laid off. In 2008 the majority were men and targeting infrastructure programs provided a major boost to the economy. This year the majority laid off are women and policy makers are terrible at helping women manage in the economy. If large gatherings are not allowed then the conventions to the restaurants to the events mean fewer working. Do more with less until people feel comfortable with the surrounding is going to be the order of the day.

Linking to dividend paying stocks, for companies that products appeal to the masses one has to worry about the general economy. For companies such as utilities that appeal to the masses but is essentially an monopoly, growth in revenues is the issue not whether the company will make money or not; for companies making money in select functioning areas, the general economy is less of a concern. Before investing ask how does the company make money? has it been through a couple cycles and still make profits. Profits is a good thing when investing.

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

In a number of recessions, the banks stopped credit to save on loan losses and when the banks stop lending money there are few low interest rate options. Government agencies can help but traditionally they take time and help on a limited number of companies. The government of the day looks at its big banks and banking sector to keep lending or keep liquidity in the market. There are many challenges but having access to capital should not be the major concern. After the 2008, banking collapse because of the mortgage back securities write offs, the government imposed stricter regulations. The banks which have been enjoying making money, have been lobbying to take the restrictions off and until President Trump he would rather deregulate than regulate.

Fortunately, some of the restrictions remain and in recent article from Reuters, the UK banks which all went bankruptcy and needed to be essentially owned by the government are now in a position to keep lending if the economy were to shrink by 30%, according to a stress test carried out by the Bank of England.

The good news is even though core capital ratios would drop from 14.8% to 11%, the numbers are still higher than the minimum regulatory requirements. The banks could also incur total credit losses of 80 million pounds or $138.2 billion, however they would have cushions to absorb the losses.

Analysts in the US believe the US banking sector is still fundamentally sound, although bank stocks are down for other reasons. The rising unemployment rates and what does that mean to the general economy. In the words of the President, how is the economy going to be great again, since no economist believes all the jobs are coming back.

Linking to dividend paying stocks, companies that can pay dividends and generate profits on a consistent basis have shown they can weather many storms. The bigger the storm, the more they rely on the government to help, both it and its customers. As an investor, you like to see strong regulations which help keep out the competition or only allows the competition to compete on the margins. You might say you do not like regulations, but competition is a double edge sword and sometimes you fall on it.

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

6 months ago, the global tourism industry was celebrating a record year for travel, now who knows. According to an article by Dee-ann Durbin of the Associated Press, Tourism Economics predicts global travel demand will not resume what was considered normal until 2023.

If you watch YouTube there are multiple events where people gather to people watch, see older cities and mix and mingle with other people. It is very hard to do if people have to stand apart for 6 feet;

Airlines have grounded 2/3’s of their planes and cruise ships are docked some will not sail until November. Millions of people who depend on tourism are laid off or furloughed, in the US the number is estimated to be 8 million plus (about 1/3 of total US unemployment).

Alexandre de Juniac. CEO of the International Air Transport Association, the leading airline trade group said carriers need to fill at least 70% of the seats to break even on most flight. If they are are required to block seats – 2 choices do not fly or raise prices 50%.

Linking to dividend paying stocks, all of us work to enjoy more leisure time, but is it safe to go? The summer months are coming and that is when most of enjoy some sense of leisure, do you believe the theme parks are going to be filled? when you consider your pent up plans – do they measure what you see in the economy? Prior to the virus, tourist stocks were great performers, how things change.

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

At the Annual General Meeting of Berkshire Hathaway Inc. announced it sold its entire stakes in the 4 largest US largest airlines, the size was 11% in Delta Air Lines, 10% of American Airlines, 10% of Southwest Airlines and 9% of United Airlines. This was big change in the Berkshire portfolio because for years, Warren Buffett said he did not understand airline investing. Then in 2016 he took the plunge.

In 2020, because of the virus passenger travel is down to 5% capacity and thousands of flights have been cancelled and planes parked and ready to go. The when is the issue.

According to an article by Jonathan Stempel of Reuters, Berkshire Hathaway is being hit hard by the virus posting a quarterly net loss of $50 billion. Berkshire owns 90 businesses, most of them are number one or two in their category. Some of the bigger names are BNSF railway – commodities are down such as coal while consumer products are up; Geico the auto insurance company – companies are giving rebates for consumers not driving. other large holdings are Apple, American Express, Bank of America, Wells Fargo, Precision Castparts and in Omaha – Nebraska Furniture Mart and See’s Candies. Usually those business do their busiest weekend in connection to the Berkshire Hathaway annual meeting.

Berkshire’s cash rose from $128 billion to $137.3 billion. Quarterly operating profit rose 6% to $5.87 billion or $3.624 a share.

Linking to dividend paying stocks, the wonderful thing about Berkshire Hathaway is the cash position which could buy up multiple companies, if Mr. Buffett and Mr. Charlie Munger see opportunity. In the meantime, the companies are progressing as much as they can, waiting for the openings we all hope for.

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

The President loves to talk about a V shaped recovery, he says he can feel it and maybe he is right or maybe he is wrong. One country to examine if that is what happened is China, where the virus affected the country first.

In an article by Keith Bradsher of New York Times News Service, he examined what is happening in China now that the country is reopening. China’s factories and industrial machinery is working and pollution is coming back to the cities. The problem is how to empower consumer. Many consumers, similar to in the US lost their jobs or had their pay slashed. For a generation of young Chinese people known for their American-style shopping sprees, saving and thrift hold a sudden new appeal.

Retail sales in China were down 1/6 from the previous March. It is estimate that the official unemployment rate is 5.9% the real number according to Larry Hu, an economist with Macquarie Securities is closer to 20%.

For many Chinese saving not spending is more important and that translates to retail sales staying down. What should the government do to encourage spending?

Linking to dividend paying stocks, if one person saves that is great, if everyone saves then the economy is flush with savings and has little spending. All economies need a balance of spenders and savers; coming out of a recession the savings likely is more important. If the government did what former Presidential candidate Andrew Wang wanted – give everyone an extra $1,000 a month, within a few months much of the money would be spent, we will see. The recovery looking at China will not be a V shaped ones, but slow and steady and slow and steady in your investments is a good thing.

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