On the front pages of the newspapers were stories about Saudi Arabia explosions on oil operations which were some of the key production and processing facilities. It was interesting that Drones are now used, for a while only US companies had access to drones and their ability to fire rockets. Saudi Arabia has been fighting the people at Yemen for a number of years and from a humanitarian prospective think about the condition of Syria. There are many similarities between both.

For an economic standard point, Saudi Arabia is the world’ s largest producer of oil and it was expected Saudi Aramco the state oil company was going to be the world largest IPO next year. One can expect another delay, although when it does come out because of the vast reserves which are relatively inexpensive to access, the company will be the most profitable company in the world. Saudi Finance Minister said it will have no impact, but we will see.

As expected, wit the Drone explosions, the price of oil increased, but understanding there is a global weak demand as we all try to be more energy efficient The price of oil is not expected to remain high for months, just a couple of weeks as Saudi brings other reserves into the market. On the geopolitical scene, the US went to war with Iraq over oil, what will the do with Iran?

Linking to dividend paying stocks, the big oil companies have been business for generations and will continue. They have a wide variety of supply options including US reserves, oil in Africa, Russia and tar sands. Those options can make up the Saudi oil until things return to normal and the increase in the price of oil helps the oil companies sustain their profits.

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

We know the economy is slowing down, we do not know if there will be a recession or not but we if the economy is slowing down, it is prudent to look at defensive stocks. One solid method to be defensive is focus on cash flow and growing cash flow. In analysis Ian Tam of the Morningstar Research Inc examined the S&P 500 index to find stocks with growing dividends. His criteria were:

Free-cash-flow yield – this compares free cash flow with a company’s enterprise value. A high number is good.

Quarterly and annual cash-flow momentum (use four quarters operating cash flow compare with the same figure 1 quarter and 4 quarters ago)

Standard deviation of total returns over the past 5 years – measures the volatility of the company’s stock price over the past 5 years, lower numbers are good.

Return on invested capital – net operating profit after taxes divided by invested capital

Variation of fiscal EPS estimates – this measure examines how consistent analyst projections are for the coming fiscal year.

To qualify, the company must pay a dividend and must be expected to raise that dividend in the coming 12 months.

Company Mkt Cap FCF Ann CF Qtrly CF Sy Std Dev Var of Rtn Trailng Div

$ Bil Yld Mo % Mo Tot Rtn Fisc Inv ROE Yld

Bristol-Myers Squ 79.432 8.3 22.4 16.7 25.9 6..2 40.8 49.4 3.4

Amerisource Berg 17.891 10.4 16.1 0.3 25.9 0.7 26.1 48.9 1.9

Home Depot 255.170 3.8 15.2 1.4 18.8 0.5 34.1 1727 2.3

Mastercard 276.294 2.1 19.0 6.0 22.0 1.3 75.5 135.4 0.5

Visa 395.095 2.8 30.6 6.8 20.9 1.0 22.5 41.3 0.6

Rockwell Auto 19.174 4.3 69.6 1.1 24.1 3.9 26.1 77.0 2.4

Intuit Inc 69.585 3.3 14.5 -2.4 23.4 0.8 78.4 50.9 0.8

Stryker Corp 79.942 2.2 7.6 5.7 19.4 0.6 22.4 26.4 1.0

S&P Global Inc 62.158 3.0 7.8 2.1 21.3 1.9 43.3 373.7 0.9

Pepsi 189.955 2.8 10.3 -3.5 14.5 1.4 24.4 62.4 2.8

Other companies are: C.H. Robinson, Masco Corp, Ross Stores, TJX Companies, Texas Instruments

Linking to dividend paying stocks, if as predicted the economy slows down the best defensive is a great offensive or dividend paying stocks which consistently make money. Whether you own any of the above stocks it is important to look at the industry and see what companies are good defensively. Some companies seem to do well both in good times and bad, for investors they can be long term holds as the stock prices seem to be consistent and in good times the prices rise higher. The boy scouts motto is Be Prepared, it is good motto for investing. Be prepared for opportunities by ensuring cash flows into your accounts and have time on your side to buy low and sell high.

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

In every industry there are awards, and many times the award gives indications for continuation of repeat performance. If a company wins an award for excellence, then one expects the culture of excellence will continue the next year. Things can change, but there is an expectation.

In the movie industry, the biggest award is the Academy Award, it has instant recognition and we know some people will go to the movie just because it won the award. In the movie industry there are festivals among the big ones are: Cannes Film Festival in France, Sundance Film Festival in Utah and Toronto Film Festival in Toronto. Each of the festivals attracts different crowds including the stars of the films. Part of the festival is to met producers, directors, and people who finance and distribute films from around the world. Apparently, in Toronto one of the very important awards is the People’s Choice Award.

Why is the People’s Choice so coveted? Well, consider that last year’s winner, Peter Farrelly’s Green Book, went on to win the best-picture Oscar, while runner-up Roma from Alfonso Cuarón was a nominee and won for best foreign-language film. Since 2011, every TIFF People’s Choice has been the Academy’s choice for at least a best-picture nomination.

Equally important from an investor point of view is the People’s Film Award tends to make more money at the box office than the other film festivals. Part of the reason is the diverse audience which is encouraged and sees the movies. Diversity can and does make money.

The People’s Choice Award went to Jojo Rabbit, Taika Waititi’s satire of Nazi Germany in which he plays a child’s idea of Adolf Hitler. Runners-up for the prize were Marriage Story and Parasite. Jojo Rabbit is produced by Fox Searchlight Pictures and distributed by Walt Disney; Marriage Story is distributed by Regatta and Parasite is distributed by CJ Entertainment.

Linking to dividend paying stocks, trends are very important in every industry and trying to determine which product has success and which one is not as successful is a very tough business. We all look for short cuts or ideas that seem to suggest success in the future. If the People’s Choice is correct, more money will flow into Walt Disney.

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

In the end of next month or October 31, the government of the United Kingdom including England hopes to dislodge itself from the European Union or EU. The Prime Minister believes it is a simple thing to do, in reality it is more complex than just walking away. One of the simple things which most of us would not consider is the wooden pallet. If you look at warehouses around the country, fork lifts are moving wooden pallets around because it is the easiest method to move from factory to warehouse to shop and depending on the size of the shop, the movement is done by a forklift. The forklift goes underneath the wooden pallet, lifts the pallet up, moves the pallet to a location and goes on to the next pallet.

In England, the process is repeated multiple million of times for 250 million pallets are in circulation across the country with 40 million pallets produced every year. The problem is how are the wooden pallets treated? To combat tree eating insects, wood pallets need to meet the EU’s regulations on heat-treated wood and these regulations were designed 20 years ago. In England, there has not been a problem with the kinds of bugs, other parts of Europe have and has been exempt from the rules because it is a member. Now imagine, before any good is exported from Europe, the pallets have to be treated or they could be rejected by the EU country where British goods were been exported.

The government says it is working on a solution, but given the number of pallets in circulation and they believe the EU regulations do not make sense given the low risk, however if the EU enforces the rules, Britian would be stuck. The rule applies to non members of the EU and Britain would be a non member if it left the EU on October 31. The process costs about a $1.66 and the heating process takes 6 hours.

Linking to dividend paying stocks, it is the simple things that people do not anticipate that make life complicated. Big ideas are great, but it takes a great deal of work and planning to make great ideas work in practice. When you are investing, always ask simple things before you invest – how does the company make money? what does it need to be profitable? how can it sustain its dividends? seemingly easy questions, which can be complicated.

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

In politics there are often 2 types of government, one that tends to see government as an answer to every problem and one that see government as trying to avoid abuses while trying not to be involved in everything. We all know if there is no regulation, then the worse type of behavior comes, maybe not right away, but it will come. When there is regulation, at least when something goes wrong, there are remedies to be found.

In President’s Trump administration, a regulation which was passed, particularly passed by President Obama’s administration is bad and needs to be rollback and likely loosen even more. In the President’s eyes less government regulations allows for companies to spend less on regulations and more making money. The downside is if you examine a city like Los Angles a number of years ago, there were many smog days. This is partly dues to the car culture that exists and partly because of the location of LA in a bowl before the mountains, the wind needs to below the stuff away. Part of the solution, since it is hard to move a city is to have good car regulations. The automobiles which are made and given California is the largest market for vehicles have greater fuel efficiency and pollute less. That is a good thing for both the environment and citizens who use the vehicles.

In an article by Tamsin McMahon of Reuters, the Trump administration is rolling back vehicle administrations in terms of emission standards. This rollback in eyes of the President is suppose to translate to lower prices and stimulate a demand for more autos which would mean more jobs. Although in reality, more jobs in factories are done by robots for they do not strike and can work 24 hours a day, 6 days a week.

In California, the Governor said we are not lowering our standards and for those who love the constitution, if the constitution does not state the issue, then states have final say. Emission controls 200 plus years ago were not written in the constitution, which means emission standards are a state’s right.

Linking to dividend paying stocks, the auto companies would prefer national standards were the same as state standards because of the size of the market in the highest states, California and 14 other states have matched California standards. To produce to national standards means cutting off 40% of your sales, does any company want that? California standards will prevail. Unfortunately, these issues which polarize the country means people will ask why care what happens in Washington? That is not good.

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

For the past couple of years, there has been an opioid crisis and as the investigation into how it evolved became clearer, it was obvious that companies such as Purdue Pharma knew taking opioids to deal with pain was very addictive and downplayed their knowledge to doctors. They rewarded doctors who issued more and more opioids which generated billions in dollars to the company and the family that owned it.

Purdue Pharma was not the only Pharma company in the business, but they were the leaders. In an article by Karen Howlett the company will file for Chapter 11 bankruptcy and dissolve the company as it now exists. In addition, the family which owns the company would contribute $3 billion in cash to the settlement over 7 years. The settlement means a case in federal court in Cleveland will not take place. Appoxipately 2,300 lawyers were in the group against Purdue Pharma.

Over the past decade, Purdue Pharma has sold over $30 billion in sales of OxyContin. Purdue promoted the drug as safer and less addictive than the other opioids, encouraging doctors to prescribe the drug more widely for everything from back pain to fibromyaligia.

Linking to dividend paying stocks, the overuse of the drug has caused many lives to be damaged in the pursuit of profit. In all likelihood the stock would have been worthwhile to on until in crashed. In buying profitable companies that pay a dividend, one hopes that the reason the companies make profits are they satisfy needs in the marketplace and there is some balance it terms of right and wrong. We all can make judgements whether you want to own certain stocks, that is a good thing, hopefully you make good judgements.

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

If you listen to old songs, there are a number about railroads and until the growth of the passenger car interstate system, railroads were king. Both for freight and passenger service, over the years passenger service went to Amtrack and the railroads kept freight. Given the concentration of the railroad companies, Warren Buffett is a large shareholder of the railroad companies. Thus, freight volumes on North American railways signal the strength or weakness of the economy.

The American Association of Railroads (AAR) noted the number of freight carloads hauled by US rail companies has declined every month for the past 7 months. John Gray, AAR’s senior VP said portion of the economy which generates freight – manufacturing and goods trading has weakened significant.

The AAR tracks 11 categories of goods and only sector is up -petroleum related products are up 20%. With the fracking, companies send oil on railcars until a pipeline can be built. Overall traffic is down 3.3% and the President’s favorite product of coal is down 6%.

The trade war has caused grain shipments to be down 5.5%

Besides the trade war, the slowing economy, floods in the Midwest up and down the Mississippi river system, as well as a shift among US carriers to shed customers as they move to precision railroading.

42% of rail traffic is dependent upon trade. The AAR is hoping the USMCA or US-Mexico-Canada trade deal is signed by Congress soon.

Linking to dividend paying stocks, as the economy is seen slowing, it is good to be in defensive stocks or ones that have been consistently profitable and pay dividedns as the years go by. While we all have a bias towards growth, sometimes being defensive is the best strategy or until after the election when trade deals are sorted out.

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

The company formerly known as WeWork now called We Company provides a very useful service in renting out office space which is shared among many individuals and companies. It has lots of promise and hype and the last time it raised money, the valuation for the company was $47 billion, now it is considered issuing shares or IPO but the valuation is for $20 billion.

According to an article by Joshua Franklin of Reuters, the drop in value is due to the company’s lack of a road map to where it becomes profitable and concern over governance issues. The company makes its money renting out office space under short term contracts, but pays the leases under long term leases, there should be a premium in between. However the company lost more than $900 million in the first half of 2019, up 25% for the year earlier although revenue doubled to $1.54 billion.

The skepticism is if the economy goes into a slowdown or nears recession, how will the company hold up? Prior to the Uber and Lyft IPO, investors wanted to see growth, but the shares for Uber and Lyft did not increase as much as desired. Barry Oxford a real estate analyst at D.A. Davidson & Co said investors now want an appropriate discount to price in risk and have a greater comfort the stock will not fall below the IPO price.

The company We Company is 29% owned by Japan’s Softbank Group Corp and 27% owned by co-founder Adam Neumann. The company paid $17 million in leases in office buildings Mr. Neumann owns.

Linking to dividend paying stocks, when you buy dividend paying stocks, the concern is profitability, will the company make profits to pay dividends this year and next year? when you buy growth stock is will the company grow faster and eventually make a profit? there is excitement in both approaches, however when the dividend comes in, it will make you feel good.

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

On the Labor Day weekend, part of the screen watching was what was Hurricane Dorian doing and when was the Hurricane going to do damage to the mainland US. It was a slow moving storm and it left much damage to the Bahamas. Watching some of the reports, even though the reporters were safe, the constant rain and wind noise were a chore to get through, it was easier to get out of the storm’s way. This was the good choice and millions of people were told by state governments to leave the coastline because of the rain, the wind and storm surges. If you want to see the power of the seas, check out a You Tube clip of the Perfect Storm staring George Clooney and Mark Wahlberg titled the Giant Wave.

After worrying about the people, then the property, the question from every Hurricane season is which companies tend to benefit and which ones do not. How do companies respond to these situations? Two of the best companies responding are Wal-mart and Home Depot, they have great logistical operational plans to help out consumers particularly if they know it advance of the disaster. In the case of Hurricane season and the first one, they can and do order extra supplies to be in the area before and after the event.

Linking to dividend paying stocks, for all disasters worry about the people first, but afterwards look at how did companies manage through the disaster? If they did a good job, chances are when there are no disasters they also do a good job. If you worry about their concentration of the primary income earnings and they did not do a good job, look for alternatives.

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