For a number of years President Trump the president who loves tariffs to encourage manufacturing in the US has failed in convince Apple to manufacture. Apple announced in late June it is moving production of the MacPro from Austin to China

According to an article by Cade Metz of The New York Times New Service, the MacPro sells for $6,000 and is only a small portion of Apple’s overall sales

Apple CEO Tim Cook in 2012 said the company would make computers in the US. Things have changed although the product was designed and engineered in California and final assembly is only one part of the manufacturing process.

Linking to dividend paying stocks, it is very difficult not to manufacture in China even though the President disagrees.

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

 

 

 

The dominate players in the world’s stock markets are large funds or institutional funds. All the funds wish to beat the markets, but as institutions often they are held to different standards than an individual. One such fund is Norway’s $1 trillion wealth fund – the funds came from Norway’s north sea oil. Part of the fund is an ethical committee which reviews companies and attempts to stay away from direct investments in various criteria. With large companies it is often difficult to stay away 100% of the time. In an article by Gwladys Fouche of Reuters, the ethical committee of Norway has cleared Rio Tinto, Walmart, Grupo Carso SAB, General Dynamics, and Nutrien.

Linking to dividend stocks, the good news for investors is management can change and companies who are offenders of your ethics can be better citizens for the world.

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

One of the big pharma companies AbbVie in late June offered to buy another pharma company Allergan for $63 billion. Allergan best known product to consumers is Botox. In the world of big pharma, they have patents on drug treatments and they tend to run out after 21 years, which means the drugs which are billion dollar sellers would be replaced by generic drugs or the cost will fall dramatically, thus the companies are on the look out for billion dollar drugs. In an article by Michael Erman, Aukur Banergee and Julie Steenhuysen of Reuters, AbbVie has a drug called Humira which is used for arthritis treatment and soon will be losing patent protection. The drug brought in $20 billion to AbbVie last year and by 2023 will lose patent protection.

The cash flow from Humira allows AbbVie to buy Allergan.

Linking to dividend stocks, when investing in a big pharma company noticed which drugs are the billion dollar drugs and how long are they under patent protection. When lawmakers around the world discuss the high price of drugs, they are talking about why you wish to buy shares in the company. Lawmakers look for the day the patent protection comes down to lower the prices insurance companies need to pay for drugs. As investors, you love the cash flow from the drugs, as a consumer you need good insurance hopefully your dividends pay for the insurance

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

 

Last year there were many fires in California but some were deemed to have started from electricity infrastructure and given the damage, the electrical company Pacific Gas & Electric or PG&E needed to file for bankruptcy to give it time to reorganize. The company has continue to supply electricity to the state of California. In bankruptcy or Chapter 11, the bondholders rights come to the forefront and they are able to dictate terms. In late June, according to an article by Jim Christie of Reuters,  a committee of bondholders proposed a bankruptcy reorganization that would inject $30 billion into the company and allow it to emerge from bankruptcy.

PG&E has until September 29 to file its plan. The committee’s plan would be funded by $18 billion in cash from bondholders in exchange for new common shares in a reorganized company. The committee believes the new company will have substantial capital to make improvements to the PG&E system.

Governor Gavin Newsom has proposed a fund of $21 billion to help future victims of wildfires.

Linking to dividend paying stocks, when a company goes into bankruptcy protection it means the existing common shares will be worth less as the company needs to issue new shares at less money. Unless you love the company it is generally better to look for alternatives and revisit the company in 6 months.

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

 

 

The nature of a dividend company is the ongoing profitability of its operations and the margins to continually turn profits to pay dividends. As investors we like that, but management every once in a while will be tempted and offered companies to invest in for a number of reasons. The mergers and acquisitions department of the investment banks make their money from bringing companies together, dividing them up and continuing on. In some cases, the process can be very good for investors and the M & A group; in other cases there are busts. It is important to understand the people who  made the decision in both cases believed they were doing the right thing for their companies.

In a recent article by  Eric Reguly, he asked was were the worst acquisitions of all time?

Mr. Reguly wrote Time Warner purchase of AOL at the start of the internet revolution – that is when people were measuring profitability by number of members, not whether those members actually bought something. Time bought AOL and then essentially wrote off $200 billion of wealth. Not to be outdone Microsoft lost money on Nokia; Google lost money on Motorola; and Sprint lost money on Nextel.

The seemingly next candidate is the company behind Bayer aspirin, Bayer chemical which has been operating for over 155 years most of those years paying dividends, bought Monsanto. At first it seemed to be a good fit. One of Monsanto’s product is called Roundup which kills weeds. It is linked to possible cancer by people who have used it for years. The linkage has produced lawsuits by the buckets in the US and something will be done to break up the Bayer company.

Someone from the executive suite to the investment advisors to the law departments on both sides missed the affect of the Roundup lawsuits and Bayer stock is fallen 50% since the merger. Will there be new people in the executive suites? will the company be broken up? how does the company put the bad assets into a separate limited liability company and walk away from the lawsuits?

Linking to dividend paying stocks, the ability to make profits means the executive suite must say no most of the time. Many years ago working for a company which was in business for over 150 years but did not capitalize on many of its assets however it did pay a dividend every year. Eventually the company was sold to a larger one which could and has taken advantage of its great assets. The larger company continues to pay dividends. There ate balancing acts but saying no means less money is lost.

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

 

 

If you think about Rio in Brazil, one of the images is the cross on top of the mountain; if you think about Montreal although the mountain is much smaller there is a cross on the mountain. A number of years ago, travelling to the city time was taken to walk up to the cross look across the city and come down again. Similar to every city there are stories behind why the cross or whatever symbol of the city is present. In the book No Place More Suitable by John Kalbfleiseh published by Vehicule Press, Montreal, Quebec, the author has written stories about the history of Montreal.

The story was about 35 years before the cross was placed on the hill, a group thought a statue of the Virgin Mary would be the think to have. Montreal has always had many of the catholic faith and statues are a good thing. It turns out some did not want it, including Protestants who believe in Mary’s son. The statue was debated for some months before city council decided to approve it, but quietly shelved the idea because of lack of funds to build the statue.

Linking to dividend paying stocks, while not everything comes down to money, there is an element when there is indecision. It would be wonderful if all the cities around the world had statues to honor those who have gone before, but statues can be decisive. More generic representations tend to win out. If the group started with a fund which gained interest and popular support over the years, the discussion would be which statue to build. Dividends give options to reinvest or buy something new or spend the money and having the option is a good thing to have.

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

A couple of years ago being the CEO of Wells Fargo was a very desirable position. The company had a good reputation, the biggest share owners are Warren Buffett and Berkshire Hathaway and then the scandals showed up. The last CEO believed customer should have 12 accounts whether they wanted them or not. It has taken a couple of years to change people and policies.

In an article by Rachel Louise Ensign and David Benoit of the Wall Street Journal, the process to find a body is taking more time than it should.

Running the 4th largest bank is one of the biggest jobs in banking but senior bankers at other bankers who are not in line for the top position have said no thank you. Part of the problem is gixing the problems is a 5 year process.

The interim CEO is C. Allen Parker who was the general counsel. Besides the Board making the decision, the Office of the Controller of the Currency must sign off on the decision. The biggest shareholders have said the new CEO does not have to come from Wall Street.

Linking to dividend paying stocks, session planning is a key part of the Board of Directors it seems the process has not worked well at Wells. For your investments can you see session planning or you should ask about it.

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Often times what we hear from politicians and business are too different things. The President likes the to talk about the build up of the Defense budget; business sees an anticipation of slower growth of Pentagon spending and new priorities such as space systems and hypersonic missiles.

In an article in the Wall Street Journal reporters Doug Cameron and Ben Kesling examined the United Technologies and Raytheon proposed merger which if successful would be the third largest areospace and defense company by sales after Boeing and Airbus. 30 years ago there were 50 big companies now a handful exist including Lockheed Martin, Northrop Grumman, General Dynamics and BAE. In the shipbuilding industry there are two companies – General Dynamics and Huntington Ingalls Industries.

The consolidation happened with cuts in the military budgets and the Pentagon has made it easier to deal with large companies and harder for smaller ones.

In terms of overlap there are few divisions that do but there are investors who wanted United Technologies broken into 3 – Otis Elevators, Carrier and Aerospace. It is expected the merger will pass the hurdles of regulatory  Washington.

Linking to dividend paying stocks, there is always different perspectives of all industries, for example defense the budgets have increased which should be better for defense companies but the defense companies see a shift from tanks to missiles which are different in the manner they are produced and profitability from each. When you buy your stocks, which perspective are you using to see the company?

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

Many of us having conflicting goals and that is normal. We hear about plastics in the oceans, now micro platics all around us and when we shop there are many uses of plastics. Eventually we think some of the plastics should be cut.

In an article by Jeff Lewis of the Globe and Mail, reducing plastics has an impact on the demand for oil. Some of the best companies to own have been chemical companies. The oil industry supplies chemical manufacters with the building blocks needed to make the resins needed to make plastic ptoducts.

BP estimated a global ban on single use plastics would shave 3 million barrels a day from demand forecasts. Currently total demand is 100 million barrels a day.

Perhaps with a shift to electric vehicles global demand of oil will fall but we are not there yet.

In another 5 years looking at alternatives to the chemical companies will be on yor horizon.

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