For the past 20 years or so, the trading prowess of Goldman Sachs has generated billions of dollars in profits for the firm. As long as the trading group generated profits, investors were happy to own the stock. The last few years, Goldman while still generating profits, does not make them as easily as in the past. In an article by Matt Scuffham and Elizabeth Dilts Marshall of Reuters, two years ago, Goldman told investors it would find new ways to generate $ 5 billion in revenues.

For most companies, generating $5 billion in new revenues would be a very ambitious plan, Goldman thought they could easily do it. It turns out, it is hard to do even for Goldman. After 2 years into the strategy, new targets are to be set by Chief Executive David Soloman.

The best method to achieve new revenues is buy a company which generates that income, however Goldman tends to do things in house. They started a retail bank, but retail deposits do not generate great income. Goldman was trying to be more diversified as regulations changed, trading profits tend to be cyclical with highs and lows, and competition increases.

Linking to dividend paying stocks, all companies are dependent on a couple aspects of their business to generate the bulk of their profits. There are other areas to generate income, but the senior management tend to come from a couple of divisions. In the above example with Goldman,it is very difficult to be diversified at a level Goldman needs to be to offset its trading income. With your investments, are you really diversified or heavily oriented towards a couple of sectors? If you are, as long as you know where the profits are coming from and if you see changes you can find other alternatives, you are doing okay.

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

As the year end is seen by all and next year being an election year for President, tariffs rollbacks are on the horizon. There are many reasons to impose tariffs such as protect existing jobs in your home country; try to encourage companies to reinvest in your home country and fight the race to the bottom of low prices.

The President believes all those things are happening, but the reality is perhaps a handful of plants came back to the US, if they did leave China, they went to other countries in south east Asia.

In an article by Keith Bradsher and Ana Swanson of the New York Times News Service, the US and China have agreed that an initial trade deal between the 2 countries would roll back a portion of the tariffs placed on each other’s products. The deal is not finalized, but it could remove some of the the tariffs the US has put on $360 billion worth of Chinese goods. The Treasury has collected $7 billion in tariffs, up from what it typically collects.

Stocks soar on the news that some sort of deal has been reached or is within reach. The ironic aspect is manufacturing and farm states have lost sales and jobs on the tariffs, and this is suppose to be President Trump’s base of support. The trade war cover 2/3 of the products imported from China and 58% of the goods China imports from the US. A lobby group called Tariffs Hurt the Heartland or desires more free trade released a report which says US consumers and businesses have paid $38 billion in tariffs

Talks are continuing and it remains unclear when and where the two sides will sign the agreements.

Linking to dividend paying stocks, sometimes government policies help the company, sometimes they do not. All companies have to adjust and see what flexibility they have to pass on prices to their customers. Sometimes they can, sometimes margins fall and one wonders when it will be over. When you examine your investments how is your companies managing with the policy?

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

One of the easiest methods to success is to copy what successful companies are doing somewhere else. Sometimes that is through franchinsing or owning the rights to a part of the country or entire country. When the franchise is opening many new stores, there is fees from the licence holders; fees from the products and marketing and fees from the land and many fees come in and everyone is contented.

In South Africa, the rising middle income group who could afford to come to a Starbucks on a regular basis was seen as a great opportunity and 3 years ago, Starbucks teamed up with Taste Holdings Ltd which spent $5 million to set up a dozen Starbucks. There was talk of more than 150 more locations. In an article by Geoffrey York of the Globe and Mail, the dream has quickly slipped away.

The long line ups, the crowds, the novelty of the Starbucks brands has gone and Taste Holdings is selling the dozen locations to a shareholder group for $465,000 or about $36,000 per outlet, less than a 10th of the cost to operate them.

South Africa is often the entry point to Africa for many companies because of its industrialized and stable large economy, relatively good infrastructure, a reliable legal system (to sue and receive money if things go wrong), and a significant middle income group. South Africa has attracted many US companies including McDonald’s, Burger King, KFC, Dominno’s Pizza, Krispy Kreme and Dunkin’ Donuts.

In the past years the coffee brand companies were shut down, with the companies focusing on increasing operations of the food brands. Perhaps it will take time for Starbucks to try again for they are successful in Asia and Europe.

Linking to dividend paying stocks, once a company is successful, there will be plenty of imitators. There will be offers to go abroad and some will be successful and some will not, there are remarkably few guarantees. Understand how the company is generating a profit, if it is the franchasing business, it needs the revenues from more stores. What part of the business generates the profits to pay you a dividend?

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

In 2016, The kingdom of Saudi Arabia announced it was going to share some of its investments with the general public in terms of bringing to the public markets the state run Saudi Aramco. For a variety of reasons, there has been delays, but the plan is to go ahead.

In an article by Jon Gambrell and Malak Harb of the Associated Press, the kingdom’s Capital Market Authority announced its approval for the share sale offered on Riyadh’s Tadawul stock exchange. The stock exchanges of the world were expecting the announcement to include one of them, but that may happen in the future. In 2016, the offering was to be the world’s largest IPO.

The reason why institutional investors are looking forward to the offering is in 2018, the company had a net income of $111.1 billion and proven liquid reserves of 226.8 billion barrels. Its net income of 2019 for the 3rd quarter was $68 billion.

The kingdom was hoping for a $2 trillion valuation for the shares which would bring in $100 billion to the treasury. It may be less. December 11 is when the shares are expected to begin trading.

Linking to dividend paying stocks, once the shares trade outside Riyadh it will be a shares which you can own for a long time. The company pays nothing for the land, it is government land, there are limited public opposition to refineries and pipelines, and the oil is still easy to drill, relative to fracking in the US or the costs are low. There are questions about its biggest oil field, but the company is a cash generator, which makes dividend payments because the government uses them as taxes, the amount given is expected to increase yearly. The stock has all the elements of a great buy and hold stock.

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

Similar to every sales company, all companies want to sell more, that is a given. If you look at some of the most successful companies over the past decade, the tech companies stand out at or near the top. It is not surprising, the executives at McDonald’s have a new plan: act like Big Tech.

In an article by David Yaffe-Bellany of the New York Times New Service McDonald’s has spent hundreds of millions of dollars to acquire technology companies that specialize in machine learning and artificial intelligence or AI. In the heart of Silicon Valley – the McD Tech Labs where a team of engineers and data scientists is working on voice recognition software.

In March of this year, McDonald’s spent more than $300 million to buy Dynamic Yield, a Tel Aviv based company that has developed the artificial intelligence tools now used at thousands of McDonald’s drive-throughs. According to CEO Steve Easterbrook, the recommendation algorithms have generated larger orders or more sales. By the end of the year, all McDonald’s drive-throughs in the US.

In September, McDonald’s purchased a tech company called Apprente, a start up in Mountain View, California that develops voice-activated platforms that can process orders in multiple languages and accents. One can expect the platform to take orders from customers as opposed to humans.

Linking to dividend paying stocks, besides focusing on the items which makes profits, the company has to reach out to understand and embrace technology. It makes management more difficult, but to be successful, the companies have to embrace technology. It is better for consumers, we do not know, but that is the way it seems to be going in order to increase sales and generate more profits. Has the companies you invested in, embraced technology? how and what are they doing?

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

In late October, Alphabet the parent company of Google reported its quarters and it was a good quarter but some concerns remain. The company is the world’s dominant provider of internet search, advertising, and video services. The company has increased spending on cloud services and consumer electronics and believes it needs to be in these markets to maintain industry leadership.

In an article by Munsif Vengattil and Paresh Dave of Reuters, Alphabet provides limited product level financial disclosures which allows investors to have questions how the company is doing regarding regulatory scrutiny, global trade tensions and advertiser boycotts. The uncertainty has met Alphabet shares are up 17% in the past year but Microsoft was up 33% and Facebook 29%. If you owned the shares those are all good numbers.

In the 3rd quarter, Google expenses were $31.3 billion or 25% more than the previous year. In 2018 expenses were $31.1 billion. Revenues increased to $40.5 billion

Linking to dividend paying stocks, while expenses were up so are revenues but for any company unless there is great reason when expenses go up 25% people have a concern, and some belt tightening is needed. The reality of every company which operates is expenses have to be lower than revenues. If you get that on a consistent basis, profits are made and dividends paid.

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

Next week is Thanksgiving and the following day is the official kickoff to the holiday season, and whether you celebrate or not, it is the make or break quarter for retail shopping. Most people shop for gifts during the holiday season. At the luxury items, the ones we all hope we can easily afford, a number of companies dominate the market. The biggest company is headquartered in France called LVMH Moet Hennessy – Louis Vuitton SE. With a long name, it is result of many mergers and the company wants to do one more – Tiffany.

In an article by Sarah White and Melissa Fares of Reuters, LVMH wishes to expand in jewellery, one of the fastest growing parts of the luxury goods market. Tiffany has been selling jewellery for over 182 years and one of well known movies Breakfast at Tiffany’s speaks volumes about who the average shopper is.

For LVMH adding the brand of Tiffany would bolster the company’s exposure to the bridal and diamond category, US luxury shoppers, and Tiffany’s overseas network.

Analysts at Credit Suisse and Cowen believe Tiffany maximum value could be $140 to $160 a share, compared to the $120 which LVMH is offering. The $120 was a 22% premium to what the stock was trading of Friday. Tiffany is valued at a discount because of falling demand from Chinese tourists and competition from Denmark’s Pandora A/S and Signet Jewelers. In additon, Tiffany is its 3rd year of a turnaround strategy.

Linking to dividend paying stocks, the brands which compete in the luxury brand although there are lower prices in the stores people pay a premium for the brand. To have a great brand takes advertising and links to Hollywood and the world of very wealthy people around the world. In general, all people love jewelry, it is how much do you want to pay? For dividend paying stocks which are the royalty of the stock market, the ability to generate profits and thus dividends is the key.

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

Governments have the ability to direct investments and when the economy is slowing down, they often want to provide incentives to assist companies to revive the economy. The problem from a taxpayers point of view it takes a number of years to see if the incentives work and they should be taken off the books or sunset laws do not exist.

In an article by Hiroko Tabuchi of the New York Times, the Government Accountability Office, a nonpartisan agency that works for Congress, reported the government has “lost” billions of dollars to oil and gas companies because of a loophole in a decades-old law.

The loophole dates from 1995 in an effort to encourage offshore drilling in the Gulf of Mexico companies were offered a temporary break from paying royalties produced. The problem is for some wells the royalties were made permanent.

The National Oceans Industries Associations which represents the oil companies says there is no mistake, if the law did not exist, the oil companies would not have drilled to the extent they have drilled.

The politicians who wrote the bill including former Democrat senator from Louisiana Bennett Johnston says that was not our intent. He said there should have been a threshold that the law did not apply when prices went over a certain price level.

Royalties from offshore oil and gas bring in $90 billion from 2006 to 2018, but they could have brought in $18 billion more.

The companies which hold the leases, royalty free are Chevron, Anadarko, Equinor, Shell, ExxonMobil, BP and CNOCC.

It is noted in 2006, the government tried to impose the royalties, however an oil producer sued and won the case. The oil and gas wells are royalty free until they are closed.

Linking to dividend paying stocks, while most people believe that incentives are a good idea when the economy is slowing or in a downturn, what happens when the economy improves. In the case of the oil and gas leases, it was only the majors or dividend producing companies which could take advantage of the incentive. Laws are made and companies allocate resources to react to the law, who can blame them for taking advantage when the economy changes so that no incentives are needed?

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

In Texas and other parts of the US, one of the great success stories is the use of fracking to increase production of oil and gas to a point where technically the US is not dependent on any other countries oil and gas. The success has increased employment and taxes and allowed a swagger to be shown.

Other countries around the world have looked at America and said we should try it here. One of the countries that went all in was Britain or the UK. For other a generation, oil and gas for Britain has come from the North Sea but that resource is slowing down and will come to an end. In an article by Paul Waldie of the Globe and Mail, Britain currently imports 60% of it s gas. In 2013, the government was projecting 40 wells, over 60,000 jobs and $55 billion worth of investment. Stock promoters could learn something from the government.

At the present time, 3 wells were drilled and they all had to shut down due to minor earthquakes of 2.9 on the Richter scale. The public of the UK does not like fracking and the many protests cause government’s security cost to soar.

More importantly is there is a global supply problem, there is plenty of gas and in the world of market demand, prices have dropped. Why go ahead if is less expensive and easier politically to import gas? For now Britain imports gas.

Linking to dividend producing stocks, anything that works will be repeated, if it works to make consistent profits, you should see the same model all over the world. Fracking worked in the US, but there is more land in the US so the problems are not seen to the same degree as problems. In closer environments where people are easily found, they object, there are many stories in the Penn State area. Before you accept the concept ensure local conditions match closely.

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