In the middle of the month, US Commerce Department releases information concerning the last month activities. One of the most anticipated reports is the US retail sales which because the consumer is 2/3 s of the US economy, how consumers are spending is a major concern. In an article by Lucia Mutikani of Reuters, the report showed consumers went on a spending spree., although motor vehicle sales were down.

The President cheered the sales and vowed the America First plan was working, even though most of the items at the shopping mall are not made in America, they are retailed in America. Financial markets are expect a 1/4 or 25 basis point decrease in interest rates at the September 17-18 policy meeting of the Fed.

The solid retail sales was also reflected in higher profits for retailers such as Wal-mart which raised its earnings for the year. Wal-mart was helped by a strong on line sales.

On the manufacturing side, output has declined more than 1.5% since December. Manufacturing makes up 12% of the economy is also weighed down by higher inventories. Employment continues to decrease by the manufacturers, although the increasing use of robots allows for output to continue.

The economy grew at 2.1%, down from 3.1% in the previous quarter.

Auto sales were down 0.6% after rising 0.3% in June. On line sales increased by 2.8%, after rising 1.8% in June.

Linking to dividend paying stocks, similar to all economic data there are good things to see and areas of concern. Rarely do you see everything going on full cylinders, so you can ask yourself are you better off? is the country better off? Will the people you see still continue to shop at a healthy pace or wait for Thanksgiving and Christmas?

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

In a search for a solution, how you identify the problem is a key. The worldwide economy is slowing, or at least many indicators or signs are showing the way. President Trump sees the problem with the slowing economy as the problem with the Fed, its rates are too high.

The President wants a cut of 1/2 % from the 1.25 to 1.5% it is now. The President believes a half percent cut would sent the Dow to over 30,000 and the world would be doing great.

In an article by Reuters, on the Fed side, the yield on the 2 year Treasury note briefly went above the yield on the 10 year Treasury note or an inversion. Yield curve inversion is a classic signal of a looming recession. The US curve has inverted before each recession in the past 50 years. It was a false signal just once in the 50 years. When the inversion happens borrowing short term is more expensive than borrowing than longer term. This means funding day to day operations is more expensive than long term plans, which makes people to slow down on economic activity, this tends to affect consumers who see layoffs. The consumer who is 2/3s of the economy slow down in their buying and the economy slows and recession arrives.

In the Global trade world, the flows have slowed lead by Germany whose economy depends on exports. The economy went into negative during the second quarter. China’s industrial output has slowed down.

Last September, the US central bank had a rosy outlook for the economy, expecting the stimulus from the Trump administration massive $1.5 trillion tax cut package would sustain growth and justify higher interest rates. The stimulus faded faster than expected and cuts are likely. Most of the tax cuts went to companies paying higher dividends or buying back stock which helped the stock market but not necessarily the economy as a whole.

Linking to dividend paying stocks, how you define the problems is the way the solution will end up. If President Trump does not see tariffs are causing slowdowns in the world economy, he can go after the Fed but with rates so low will an small lowering affect consumers who will not see anything on their credit cards going lower? The way you see the problems will mean which stocks should you buy or sell or increase cash?

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

If you believe in buying stocks, you believe in the American Dream. In a few case some people started with very little and ended up controlling vast conglomerates and Ling is one of those few exceptional cases. James Joseph Ling or Jim Ling started as an electrical contractor investing $2,000 of his own money and controlled the 14th largest company in the US . LTV or Ling-Temco-Vought was headquartered in the LTV Tower in Dallas, Texas. As one of the largest conglomerates in the 1960’s, Jim Ling was an important business person in Dallas and around the US, showing what could and can be done. The company started in electrical contracting the Ling name; began to consolidate other electrical companies across the US, then bought Temco which was in the aerospace business and added Wilson Sporting Goods, a Meat Packaging Company, Jones&Laughlin or J&L a major steel making operation. In the 1960’s and 1970’s conglomerates were considered a good thing to increase shareholders’s value.

The book Ling by Stanley H Brown published by Bantam Books, NY, 1972 outlines the rise and fall of Mr. Ling and subsequent rise to his next conglomerate. Mr. Ling made very good use and knowledge of using bank credit and bridge loans to convert to equity to restructure companies to sell public securities which pushed up the stock price of LTV to continue doing it again. The problem with many organizations is the level of debt and when others get worried. Mr. Ling had the company pay for most of his expenses and tied his shares which at the time was the largest shareholder to pay for other ventures. When the debt levels were reaching too high in the eyes of Wall Street, the price of the stock fell and that correspondingly made more worried. Eventually the Board shuffled Mr. Ling towards the door and out, but the assets of the company were eventually sold. For a while, Mr. Ling was on the Boards of major institutions such as Dallas Cowboys, universities, hospitals and other good works for the Dallas area.

Linking to dividend paying stocks, debt is one of those variables which Wall Street will load up on companies and then when something changes, complain companies have too much debt and need to sell assets. The problem of course is the assets are not liquid or take time to sell and need the correct conditions to get the best price or shareholders suffer. When you buy your shares, examine the debt levels and what is too high and what is good. As long as the company is profitable and can easily manage its debt and return money to shareholders, then you have few worries. If the debt is dependent on the subsidiaries generating very good returns, remember the economy moves in cycles.

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

When you think about oil reserves you likely think about the West Texas Shale, Middle eastern oil but have you thought abut the country of Congo in Africa? Along the same plan as Nigeria and in the center of Africa is the Democratic Republic of Congo. In mid August, the national oil company announced a major find which if proven could bring the DRC into Africa’s major oil producers. In recent months, Italy’s ENI and France’s Total have found oil, but the SARPD Oil find of roughly 1 billion hydrocarbons of which 359,000 million barrels of oil or possible production of 983,000 barrels a day.

This one find could bring in $10.5 billion into the DRC which would roughly double the existing GDP or things could change drastically in the Congo. More drilling and more pipelines will be needed.

Linking to dividend paying stocks, unlike the resource industry where there is a constant search for profitable resource extraction, one is looking for reasonably consistent cash flows on a yearly basis. In the resource industry, once the find is made and there is a healthy long term royalities there is a desire to own the stock. In the non resource sector, you are looking for relatively boring industries but have service agreements on a long term basis. Then you do not need to worry until the dividend flows in and you can decide how to allocate it.

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

The US economy is driven by the health of the US shopper and it has been that way for a number of years. This is the reason why data released by Washington on shopping is vital to see, are consumers bullish, neutral or bearish? President Trump loves tariffs and was going to impose another $300 billion on Chinese goods, until there was push back on the who was paying for the tariffs? In reality, the Chinese are not paying it is the American consumer and thus President Trump backed off on some of the items until after the holiday season. In an article by David Shepardson and David Lawder of Reuters, some of the items not having the tariffs are cellphones, laptops, and other consumer goods such as clothing and footwear. Think about the items people have under their Christmas tree. President Trump’s new deadline is December 15 for the last minute shoppers.

President Trump said, just in case the tariffs have an effect on US shoppers as if he did not know. Although most retailers have already purchased the goods for the critical holiday season, where many retailers make profits, the Retail Industry Leaders Association said the delay is welcome news as it will mitigate some pain for consumers through the holiday season.

While the Trump administration and China are still negotiating a trade agreement, Goldman Sachs no longer expects a trade deal before the 2020 US presidential election. For now, technology consumer stocks traded up on the announcement of the delay.

Linking to dividend paying stocks, everyone wants what is best for the country, however investors deal with reality not political announcements. In terms of tariffs, no tariffs is better for everyone, but President Trump wants tariffs even though remarkable few companies have moved their operations from China. If you shop at Wal-mart examine where the items come from and determine how successful the President is.

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

Most of us have a bias which is generally a good thing. We are bias in some careers or crimes are left to young people, when we age there is an expectation we will slow down. Part of the reason is pensions, if you have a good pension then you really do not need to work. What happens if you do not but over the years became use to living better than middle income or were in a profession where you wanted one last big score? What if you had only had the basic government pension? The book.The Last Job written by Dan Bilefsky published by W.W. Norton & Company, London, UK, 2019, helps to ruffle our age biases.

On an Easter weekend in London, England a crew of men used a power drill to break into the Hatton Garden Safe Deposit values to steal millions of dollars of jewels, diamonds, gold and cash. The average age of the thieves was 72 years.

With all high value robberies, much work goes into the planning and timing. The men were all grand fathers, long time thieves, spent half of their lives in jail and wanted one more kick at the can. When someone is retired, they have time to plan for meeting friends at a restaurant is a normal thing. The men met, had tasks assigned to each, went about their days helping to look after grandchildren and met in a few days to have more tasks. With planning for a long time patience is the key. This played to the strengths of the men and in the aftermath the police would be impressed.

The unimpressive part was execution and how and when to divide up the jewels and gold. One of the thieves drove his car to the heist but it had distinctive features and in England there are cameras everywhere. The thieves left clues that a law enforcement society could track them and eventually they were caught.

Linking to dividend paying stocks, everyone can do planning, as one gets older the planning can take longer or feels it can take longer. Similarly we all know the markets go up and down, your planning is what to do when the markets go down, what would you buy? and when the markets go up and the value of your assets is higher what do you do or not do? The planning helps make decisions, take time to make your investment decisions.

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

Every retailer has a tough job to stay current, on trend and have many repeat visits which include purchases. One method which is increasingly becoming very popular is a subscription series such as Amazon Prime which gives free shipping and brings in a billion a year to Amazon. All companies look at that number and want to republicated it and Nike the running shoe company has come up with the Adventure Club.

The Adventure Club is aimed at 2-10 years, has 3 levels $20, $30 and $50 a month and the parents can receive a new pair of sneakers once every 3 months, or 2 months or every month. In an article by Nivedita Basu of Reuters, Nike says solving the needs for parents with kids age 2 to 10 means we are going to start building relationships through kids. The idea is the kids will ask for Nike and as the age they will continue to buy Nike runners.

Linking to dividend paying stocks, loyalty and repeat business is the desired goal of every business. Subscription services are expanding in order to bring in an expect cash flow every month whether there are sales or not. The higher the cash flow, the more the options for the company.

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

When you go into the grocery store, one of the biggest companies on the shelves is KraftHeinz. In early August, in an article by Richa Naidu and Aishwarya Venugopal of Reuters the company reported weak sales and wrote down the value of several business units by $1 billion.

The competition for KraftHeinz is shoppers buying private label or store named products, changing consumer tastes, and lower investment in brands as management has been aggressively cutting costs. The trick is to cut costs without gutting the marketing budgets too much. In addition, costs for inputs and transportation have risen.

The company will try to move from cost cutting to focus on efficiency and a stronger balance sheet said new President Miguel Patricio. Mr. Patricio joined KraftHeinz from Anheuser-Busch InBev in April.

The writedown by the company is the second in 2019, the first was in February when the company wrote off $15.4 billion in assets on Kraft and Oscar Mayer brands.

Linking to dividend paying companies, the writedowns by KraftHeinz shows how competitive the marketplace is and although the large companies have most of the advantages in front of them in terms of shelf space, marketing dollars, consumer loyalty, when a market is competitive watch out.

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

Nokia was the leader in the mobile phone industry and then almost went bankrupt, while the reasons are numerous there are lessons to be learned. In the book Transforming Nokia by Risto Siilasmaa published by McGraw Hill .NY, 2019 the author offers some views . Mr. Siilasmaa was Board Chair for a number of years.

Over the past few blogs, Mr. Siilasmaa approach of being a paranoid optimist has been outlined. Part of the Board Chairman’s job is negotiating and to be successful the following should be done:

Maximum face time in negotiations

Keep the negotiation team small and the feel of the discussion intimate

Team up a negotiator who matches the counterpart. ie CFO to CFO

Plan your negotiation tactics in advance. Prepare for all scenarios.

Be systematic and clear on what you ask. Know your limits, know your deal breakers and know when to give in.

Keep your board with you every step of the way.

Keep up momentum in the negotiations. Make sure that there is always a next step agreed to by both parties.

Ask boldly for what you need. Explain clearly the why of it. Do not be afraid to push the envelope, but focus your energy on doing so in a way most likely to produce your desired outcome.

Relationship building is an important part of negotiating. Trust keeps the lines of communication open, even when negotiations break down, and enables you to restart proceedings. Trust is the oil that makes everything run more smoothly.

Obstacles are an opportunity to create trust.

Leave your ego at the door.

Use your brains to do what makes sense according to the circumstances. Be bold, humble, eager, and patient. Be yourself. Combine intuition with rigorous analysis and a hefty dose of caution. Be prepared for any alternative and you will never be surprised.

Linking to dividend paying stocks, in the book Mr. Siilasmaa outlines the sale of the business to Microsoft and Nokia transforming fo a digital communications infrastructure business. It was not easy but good principles and values helped make the transition easier. What values do your companies have?

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