If you asked most people about a company they knew and respected GE would have come to the forefront very quickly. GE the company that brings things to life. Prior to the 2008 financial meltdown, GE was one of the largest financials services companies in the world, then it fell apart and the massive amounts of profits went away. Since then GE has been struggling to reinvent itself in the manufacturing businesses.

In an article by Alwyn Scott and Ankit Ajmera of Reuters GE was going to freeze pensions for 20,000 salaried workers to take measures to reduce its retirement fund deficit by $8 billion.

CEO Larry Culp is trying to raise cash and pare down $105.8 billion in debt, when he is done GE will focus on power plants, jet engines and windmills, plus related equipment and services.

GE’s pension services are underfunded by $27 billion at the end of 2018. The pension plan is being moved from a defined benefit to a defined contribution such as a 401(k) plan in 2021. The difference is a guaranteed payout to one that moves up and down with the stock and bond market. Both have their advantages but the second one is less expensive for the company.

The company has struggle to boost profits amid a slump in demand for its gas fired turbines as more utilities move to solar and wind power alternatives. GE also faces potential costs of more than $1 billion in its jet engine unit from the grounding of Boeing’s 737 <ax airliner.

GE’s industrial net debt stood at $54.4 billion as of June 30. GE said it was on track to hit its target of less than 2.5 times net debt to earnings before EBITDA by the end of 2020.

Linking to dividend paying stocks, interest rates are at very low numbers which encourages companies to raise money by selling bonds, that can be a very good thing to do. However at some stage, if economy softens too much debt is very bad for investors. There is a balancing act it regards to debt, as a dividend based investor you like less debt than more debt.

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

Think about President Trump, everyday he tweets about a variety of subjects most of it has little consequences to the everyday life of US citizens. Houston Rocket GM Daryl Morey tweeted about Hong Kong and the desire to have more freedom. The Chinese government did not like the tweet and Chinese TV dropped NBA exhibition games.

In an article by Chris Gallagher and Se Young Lee of Reuters provides context – The Chinese market is one of the largest consumer markets in the world and for the past 20 years, the NBA has working to ensure people in China watch NBA games and buy merchandise. The Houston Rockets was the team which Yao Ming played and starred and is a national hero in China. The NBA broadcast rights for was sold for a 10 figure sum or $1.5 billion and online partner Tencent counted more than 500 million viewers for streamed games. If Houston were to relocate to Shanghai, it would be a profitable team.

Daryl Morey apologized for the tweet, however the Chinese government was not letting up , Chinese smartphone maker Vivo, a key sponsor for the exhibition games in China announced it was suspending all ties with NBA underscoring the strength of the backlash in the country.

Linking to dividend paying stocks, all companies employ people and everyone has opinions, most people working for a company are not the spokesperson of the company but they have opinions. In many countries around the world, people are allowed to voice their opinions, however in China some opinions are not allowed to be voiced. This is a very difficult aspect to manage, because of consistency and where leaders of countries draw the line. If you cross the line, be aware of consequences. Most institutional investors and corporate executives do not want to cross the lines.

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

When an investor is successful over a long period of time, money flocks to the fund, because we all believe the people behind the fund can repeat their success again. One of the most successful investor has been Masayoshi Son and SoftBank Group Corp. Anyone who has taken an Uber, sent a Slack message or worked at We Work has put money into SoftBank.

In an article by Peter Eavis and Michael J De La Merced of the New York Times News Service examined the latest going of Mr. Son. SoftBank made a large investment in Alibaba Group Holding in China and earned over $100 billion. Mr. Son is looking to build a new fund called a Vision Fund to invest in artificial intelligence, robotics and other advanced technologies.

The issue is WeWork was going to do a IPO in the area of a valuation of $47 billion, the market has examined WeWork and suggest it is worth $15 billion at best. If the IPO goes forth at $15 billion, SoftBank would need to take a $2 billion writedown rather than a $30 billion profit. Quite a change, which is the reason why the founder of WeWork has stepped down.

SoftBank is the largest cellphone companies in Japan. and owns Sprint in the US which was purchased for $21.6 billion. Sprint and T Mobile recently received approval to merge. Mr. Son wants to take on Verizon Communications and AT&T, it is a huge uphill battle.

Analysts say one of the biggest problems for SoftBank Group is that its enormous investments in startups have pushed up valuations for young companies that no other investors are willing to pay. WeWork is the the prime example, how does the company make a profit? and if there is a downturn in the economy will people pay premium rates for office space or will office rates fall?

Linking to dividend paying stocks, the great thing about these stocks is you can easily determine how they make a profit. Then you can go through various scenarios if they will continue to make a profit to pay the dividend. The reason why although every business can be complex, bring it to the simplest reasons. If those reasons can, you can look for alternatives.

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

A month or so ago, drones knocked out 5% of the production of oil in Saudi Arabia. At one time that would have produced dramatic results of a downturn in the world’s economy. Now days, while important the world’s oil traders and the economy absorb it and went on. One of the reasons is the energy supply has changed over the past few years and more power is coming from solar and wind. Fossil fuels both oil and gas are still extremely important but the world’s energy has turned a corner.

In addition, cars are changing and have changed. The latest example is the 2020 Porsche Taycan.

In an article by Norris McDonald of the Toronto Star, he drove the Taycan, but first he learned about the vehicle. He went to Atlanta, Georgia to attend a technical briefing and the car will leave no CO2 imprint. Equally important the acceleration of the Taycan goes from 0 to 100 in 3.0 seconds and has a top speed of 270 miles a hour.

A few weeks later Mr. McDonald was in Germany to test the vehicle – he was with a professional race car driver on the German Autobahn where there is no speed limit and the car went up to 265 mph and had to slow down because of someone doing 225 mph. The car can reach these speeds because of adjustable air intakes and variable rear suspension.

Porsche has reduced the CO2 emission per vehicle by 75% and it its working towards 100% through the Porsche Production 4.0. Smart means flexible and connected production, lean means responsible and efficient use of resources, and green means sustainability and environmental protection. Porsche’s plan is by 2025 half of the vehicles will be electrified – either plug-in hybirds and fully electric vehicles. By 2030 all electric.

The cost of the car is around $200,000 and will be in showrooms in 2020.

Linking to dividend paying stocks, most innovations happen at the most expensive level and then filter down. The technology to allow a Porsche to go 270 mph means some the average commuter car will not necessarily go that fast but will easily means the needs of the family driving the vehicle. That becomes the game changer which means some rental cars will be electric and then the choice at all showrooms will be electric.

Fortunately for the grid system, it is very hard to knock out 5% of the world’s power at one time, however it should mean utility companies will always pay a dividend.

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

Most people reading this will remember or know about the invasion of Iraq looking for WMDs or Weapons of Mass Destruction. Before the invasion, a case was made Iraq had WMDs and were prepared to use them on either Israel, Europe or the US. Based on evidence which was presented at the United Nations, the people of Iraq must be stopped. It turned out it was a made up fact because no WMDs were found.

In WW II, the allies had a similar concern, nuclear weapons. The story of the search is in the book The Bastard Brigade by Sam Kean published by Little, Brown and Company, NY, 2019. The title refers to the Brigade or Army Unit that was not attached to anyone other but had the highest authority to do what was necessary to track down both the components needed to make nuclear weapons and the scientists. The book is written in the fashion of a novel and is very interesting to read.

Prior to WW II, the goal of everyone working in the nuclear environment was the pursuit of knowledge to help understand and try to harness the power of the nuclear energy. During WW II, then and only then the nationality and religion of the scientists became important. Prior to WW II, sharing of information was both fundamental and critical. The sharing of information allowed other scientists to learn and then try for the next step. Most next steps took years to advance. A career might be moving the bar very slowly forward.

In the book, both the Allies and Nazis were terrified the other side would use nuclear weapons, the Nazis threatened but it turned out they were behind the Allies and the Allies used nuclear in Japan to end WW II. The book is from the Allies perspective and targeted the raw materials needed to make nuclear weapons.

Some of the most daring raids came to stop the production of heavy water in the Vermork power plant in Norway and the bombing of Peenemunde. The Allies were always amazed at the ability of the Nazis to build and in large manufacturing facilities.

In the end the book is about people, people are similar to other people, people with egos; people who make over sized contributions to the war effort and people who believed the Nazis had to be stopped before they had the nuclear option.

Linking to dividend paying stocks, whatever the industry you invest in the community tends to be relatively small which means it is relatively easy for you to continually learn and understand the industry. In the nuclear industry, it is a handful of people; in other industries concentrating on both newspapers and industry magazines will give you profiles of those who are the leaders in the industry. You will like some, admire some and invest in some for as long as the company is run reasonably well, you are investing in people to do the things they say they will.

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

There is nothing Wall Street likes better than the ability to measure something. Economists talk in concepts, on Wall Street they like measurable numbers. Either the company is making money or it is not. In the first Tuesday of every month, the Institute for Supply Management (ISM) releases its purchasing managers index (PMI). In an article by Stephen Culp of Reuters noted the manufacturing sector accounts for 12% of the economy. Service and retailing account for most of the rest, however the manufacturing index helps drive the other sectors. In August the PMI was down to 47.8 from an an expect number of 50.1.

This was the second time the index was down which means exporters are closer to recession than booming. The biggest reason for the downturn is President Trump’s tariffs on Chinese imports. The problem is compounded by the increase in the dollar which means for the next few months companies will be more inclined to wait or scale back until they can read the tea leaves of the consumer.

During the first quarter of 2018, when tariffs came on Chinese goods, the negative currency impact was $40 million a year. That number has balloned to $23.4 billion.

The companies most affected included GE which recieves 65% of its income from outside the US; Computer Chip makers such as Micron Technology; Qualcomm’s overseas customers contributed 97.4% and Nike receives 62.5% of their revenues offshore.

Manufacturing is in the early stages of a recession.

Linking to dividend paying stocks, the economy similar to all industries has some bell weather or canary in the mine stocks which gives you indications of how the overall economy is doing. Hopefully, politicians know which indicators they are and pay attention as they go up and down and take appropriate actions. While investors do segment rotation or pay particular attention to those companies which are most affected. In every downturn, there are opportunities to either accumulate a good stock at a low price or move to growing sectors.

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

For the President of the US, impeachment proceedings have begun, and one aspect it shows is who is President matters. The President tends to go over the line on multiple occasions and not remember the rules or laws. The closest example in the banking is Wells Fargo. A former CEO wanted every customer have 12 products and if you think about the number of products you have with your bank, it is likely less. In order to meet this 12 standard, fake accounts and products were set up for millions of customers. The bank CEO was fired.

In an article by Imani Moise of Reuters, for the years 2016 to 2018, Wells Fargo was the only bank among the top 4 not to have growth in loans or deposits. Think about that statement, according to President Trump the US economy has been the best performing in the world and one of the top 4 banks in size does not have growth in loans or taking in deposits. The existing CEO Allen Parker will return to being the general counsel while Charles Scharf will take his place. Mr. Scharf is the former CEO of New York Mellon and Visa Inc.

The expectation is Mr. Scharf will benefit from Mr. Parker’s work in changing the culture at the bank. The new CEO is expected to change the reputation and bring more business to the bank and the shares to move forward.

Linking to dividend paying stocks, the bank has been paying a dividend for the past number of years but the stock price has remain constant. Whenever there is a scandal with one of your investments, unless you love the shares, reduce your holdings and find alternatives as the change in culture happens. You can always buy back in a couple of years if you want to own the shares.

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

Part of investing is looking forward, we want to ensure our investments will continue to be profitable and pay dividends, we also want the company to stay in business and grow. If the company has a natural monopoly, it makes it easier, if not then we occasionally we need to look at how things fit in and if we believe the company is doing the correct thing. There is a book called How We Got to Now – 6 Innovations that made the Modern World by Steven Johnson, published by Penguin, NY, 2014. Mr. Johnson has written other books which you may want to check out.

If you look at our society and there are many wonders, how did or what needed to happen to arrive at where we are? In Mr. Johnson’s book the 6 important ingredients are glass, cold, sound, clean, time and light. You might add a category, but it is differently an interesting way to see how the world we know evolved to where it is. If you can see what Mr. Johnson sees, that will help you invest and notice if the companies you invest in do not seem to be getting in, how to connect the dots for the future.

Light

Every since fire was first used, we needed light to move around. The evolution from fire to artificial light or light bulbs is a long one. From the fire to portable fire or candles. How were candles made? The best time was from beeswax, but they were expensive so most people used tallow from animal fat. The downside was foul odor and thick smoke.

The next evolution came from whales, somehow the spermaceti in the whales skull was a great improvement on tallow, better light, no smoke. President George Washington estimated he spent $15,000 a year in today’s money burning spermaceti candles. The whaling industry which killed 300,000 sperm whales created beautiful seaside towns of Nantucket and Egartown.

The next stage was to use kerosene, when the Rockerfellers went into the oil business there was little demand for oil, but kerosene large market. Eventually the car was produced and light bulk came to being.

If you think about light bulbs the name Thomas Edison comes up, but reality is people were trying to invent the light bulb for 80 years till Edison came up with the final pieces of the puzzle. The reason it took so long was the light bulb has 3 parts: some kind of filament that glows when an electrical current runs through it’ some mechanism to keep the filament from burning out too quickly and a means of supplying electric current to start the reaction in the first place. Why does Edison get much of the credit?

Edison was a master of marketing and PR. He helped the press; he would announce solutions to scare off competitiors; and he did manage to show light bulbs that would last 5 minutes, and in 1882 he did produce a light bulb that was well ahead of his competitors.

Edison found a filament that worked and equally important was the team he had assembled around him. The people were diverse in nationality and professional expertise. Edison did not just invent new technology, he invented an entire system for inventing, to make the teams creative: assembling diverse skills in a work environment that valued experimentation and accepted failure; incentivizing the group with financial rewards that were aligned with the overall success of the organization; and building on ideas that originated elsewhere. He said he was more of a sponge than inventor.

Another aspect to light is taking photographs when it is dark or flash photography. The person who invented it was interested in showing public health problems, but to see the problems people had to see what happens after dark or when the lights go out.

If you have been to Las Vegas, for many years they had no street lights because of the neon signs of the hotels. Thanks to the electricity generated by the Hoover Dam bringing electricity to the desert; and technology from France, an opportunity came forth and although neon signs are in Times Square, Las Vegas skyline is neon signs not buildings.

If you buy 99% of products there is a bar code on it. The bar code is called a Universal Product Code and uses a laser to scan it. The bar code greatly reduced the costs of maintaining a large inventory and thus allowed for stores to get bigger.

Linking to dividend paying stocks, in this book, the author looked at 6 basic ideas and linked them to improvements in how we live. It is a very interesting perspective and needs a great deal of information to connect the dots. If you can do this, you might see trends a little easier and maybe profit from them. The information also shows there are always many alternatives to solve problems, but are they the correct problems to be solved in order to make money? Dividend producing companies have a track record of doing that, but life does change over time.

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

Part of investing is looking forward, we want to ensure our investments will continue to be profitable and pay dividends, we also want the company to stay in business and grow. If the company has a natural monopoly, it makes it easier, if not then we occasionally we need to look at how things fit in and if we believe the company is doing the correct thing. There is a book called How We Got to Now – 6 Innovations that made the Modern World by Steven Johnson, published by Penguin, NY, 2014. Mr. Johnson has written other books which you may want to check out.

If you look at our society and there are many wonders, how did or what needed to happen to arrive at where we are? In Mr. Johnson’s book the 6 important ingredients are glass, cold, sound, clean, time and light. You might add a category, but it is differently an interesting way to see how the world we know evolved to where it is. If you can see what Mr. Johnson sees, that will help you invest and notice if the companies you invest in do not seem to be getting in, how to connect the dots for the future.

Time

Time is an interesting subject because we never gain it once it has gone. For generations, people got up when the sun came up and went to sleep when the sun went down and it was good. For many people that was good, however if you traveled then it was not good, for time was not constant. At present we live in time zones which means everyone living in the time zone sets their clocks to the same number. How the time zones evolved is an interesting story.

Legend has it in 1583 a 19 year old student at the University of Pisa attend prayers at the Cathedral beside the Leaning Tower of Pisa and noticed one of the lamps swaying back and forth. It seemed no matter how large the arc, the lamp appeared to take the same amount of time to swing back and forth. Years later Galileo Galilei, increasingly obsessed with the science of dynamics, the study of how objects move through space, decided to build a pendulum.

It was an idea that needed time to ripen for most people were not worried about what time it was. However if you were on a ship, latitude was relatively easy to figure out, the longitude was a problem. The famous Longitude Prize in England offered $1 million for the winner. (there is an interesting movie about it called Longitude to see how people tried to solve the problem). As society changed to an industrial one, time became more important. Thing about hourly wages, gaining efficiencies with time motion.

Time was a luxury item, until Aaron Dennison mass produced them and over a 160,000 were sold. President Lincoln owed a watch and so did many soldiers in the civil war. Sears was started when Sears and Roebuck launched a mail-order catalog showcasing watch designs.

As pocket watches were being used by more and more people, it came time to standardize time which happened in 1883 when time zones were introduced.

On your smartphone you have a quartz crystal because they are very accurate. To be more accurate atomic clocks were built in the mid 1950’s and this is how we have the most accurate time.

Linking to dividend paying stocks, most of us take time for granted although it does regulate us. If you buy stocks you wait until 9:30 with the New York Stock Exchange opens and trading begins. High frequency trading is based on time and speed; a number of years only a few people could have imagine the trading patterns. Something will evolve in the future, will you see it?

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