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.

A month or so ago, the Business Roundtable of some of the biggest companies in the US announced they believed besides making profits to their shareholders they also had a obligation to stakeholders of their companies – employees, suppliers, and communities. Just after Labor Day, Walmart announced it was still selling rifles for hunting, but would not longer carry handgun ammunition and asked in states with an open carry legislation do not bring you gun to the store.

In an article by Anne D’Innocenzio of the Associated Press, Walmart President Doug McMillion said, Walmart has a long history of serving responsible hunters and sportsmen and will continue to do so. The only thing they will no longer carry is ammunition which is used for military style weapons. In 2015, the company stopped selling semi-automatic weapons. Walmart was the location of shootings which killed shoppers in El Paso, Texas.

There will be no material affect on the profitability of the company, although the NRA came out and suggested their members not to shop at Walmart, which is not going to happen.

Linking to dividend paying stocks, retailers will stock what their customers demand and if it is legal, retailers will try. Later, they will determine if they should or if it right to do so. If government does not lead, someone else has to step into the void and take leadership. In this case, polls reveal the public wants government to do something, and Walmart is doing something.

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

It is sometimes hard to figure out the President, on one hand he says he is an environmentalist, on the other hand his administration has proposed to take away every Obama-era limits on the oil and gas industry. Perhaps the administration just does not like Obama and wants to turn back the clock, however many people and companies do not want to turn back the clock. In an article by Timothy Gardner of Reuters, some of the large energy companies such as BP and ExxonMobil favor the regulations regarding methane. They would prefer a consistent standard as opposed to various state standards. They also believe climate change is real and want to do their part although much slower than environmentalist want them to. When the article came out in late August, the world was watching the Amazon fires and a Hurricane coming towards Florida and each year it seems to be getting stronger.

There is never one reason, but many, however something is changing. The people who are in charge of the air and water says the proposal only removes unnecessary and duplicative regulatory burdens from the oil and gas industry EPA administrator Andrew Wheeler said.

It is hard to believe that is accurate when the EPA has not charged anyone when leaks of oil and natural gas happen, but maybe there is over regulation. It is up to you to believe the correct story.

Linking to dividend paying stocks, often times the public and companies get ahead of the government regulations and rolling the regulations back while sounding nice as a political soundbite is not the solution the public is looking for. It is not likely the oil and gas sector will make billions of dollars extra for the easing of regulations, but may lose when the public makes it choices in energy solutions. There are winners and losers when government regulations come on and come off, but the public has to buy into the benefits.

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

With the rise of Vanguard Funds, many fund family have a lower cost option of index funds. In reality, if you buy the index and over the years the index has a very established manner to discard the losers (companies whose shares have decreased) and replace them with winners (companies whose shares are increasing), overtime the index will go higher. In addition, if you own the fund it charges a minimum fee, overtime your money will increase faster than if you own an actively managed fund which performs as well as the index fund. The big concern is markets go up and down, which means index funds go up and down and if you need your money quickly it may not be the best time to receive it. If you held your fund for a number of years, it should be higher. Sometimes actively managed funds do better than the index, sometimes they do worse than the index, no one really knows until we look at the past.

One of the issues for profitable stocks, which makes them valuable to own is often they are included in the index. Once a stock is in the index, typically the index funds will own at least 5% of the public float. This means if a company faces a downturn, it will get worse before it gets better. If a company comes out of the index, this means the index funds have to sell the stock, which can potentially depress the stock price even more. This means there is money to be made or lost depending on what the index is doing. The dates are announced in the press, and the investment dealers have a reasonable idea of which stocks are going to be replaced with the ones coming out. Once again, if the stock is in the index, the index fund has to buy the shares, if the stock is coming out, it has sell the shares. It is possible to keep the dates in mind and buy the stocks coming in and receive some upward increase as the stocks are added to the index. You keep them because they are profitable and growing.

Linking to dividend paying stocks, if you have a portfolio of profitable stocks, all the institutional advantages of the market work for you which is a good thing. The institutions have rules which stocks they can and cannot own; profitable stocks with dividends are included in index funds and being profitable allows the company to keep paying dividends. Let the institutions help you in building your wealth.

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

China has over one billion people and an emerging middle income which makes the demographics of China a country which any company would want to establish roots to grow their business. Many companies have diversified into China and when you listen to executives they have high hopes for their investments in China. Then along came the tariff President who has thrown a monkey wrench into the situation. In an article by Andrea Shalal of Reuters, US companies doing business in China remain profitable by 81% say the escalating trade tensions have affected their business operations. The US-China Business Council which represents 220 large companies notes the tension is rising.

Nearly half the companies surveyed reported lost sales and market shares as a result of tariffs imposed by the US and China. The reason is because of the leadership at the top of the country reflects the companies in the marketplace.

None of the large companies expect a mass exodus, but it was noted when companies first went to China it was a low cost producer, over the years as the economy changed costs have risen and many companies have and continue to examine over locations to find low cost producers. However, they expected to retain and grow their presence in China.

Linking to dividend paying stocks, while the trade deficit grows with China, is tariffs the best solution to build a better solution? If you believe no, then while US companies need to diversify it helps when the government is on the same wavelength. When government policies change, it is hard to move around supply chains, if desired and more importantly no one wants to leave the marketplace. It is relatively hard to sell American owned products to Chinese consumers when the American government is making it harder to do so.

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

In late August, the leaders of the G7 met in France and just before they met, something interesting happened. European leaders looked at the fires in Brazil’s Amazon forest and told the Brazilian President if you do not put out the fires we will not sign a trade agreement with you and we will curtail trade into the European Community which is 300 million people.

The backstory is Brazil has a new President who seems not to understand the Amazon rainforest has on the world’s environment. President Jair Bolsonaro believes the more clearing of the rainforest, the better and the easiest method to clear is by fire. At the fires, large cattle ranches and farms can plant crops. As the fires increased, the President blamed the increased fires on natural cases, then he blamed the environmental groups in Brazil and all the while according to Lisandra Paraguassu and Jamie McGeever of Reuters, the President sent to the media all the things the Brazilian government is doing to being good stewards of the environment. It is important to note the farmers who set most of the fires had a tacit encouragement from the President as he repeated said the Amazon should be exploited for minerals, agriculture and logging. The President said the government was taking care of its problems and could fix them.

The European leaders examined NASA pictures, the satellites go around the world and take pictures of the planet and told the President do something more, some countries offered equipment to help fight the fires. The President called in the army and allocated water bombers to put out most of the fires, likely against his better judgement, but maybe he learns.

Linking to dividend paying stocks, cameras are everywhere including in the sky, there is no hiding and companies and countries need to start clean rather than with lies defending their actions. In this case the leaders of the European community told another country what it can or cannot do; in the Wall Street Journal there is story about the growing sense of evaluating leaders on sustainability as well as profitability. The Business Roundtable of the US said companies are not just for shareholders but stakeholders. Sometimes the public gets ahead of companies, if your investments need public acceptance to buy, then if the company is not in the space, they need to move towards it very soon.

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

In mid August, the President told reporters he was thinking about giving the middle income group a tax cut by cutting payroll taxes. The next day, the President decided that he would abandon the idea because of the strong economy. In an article by the Associated Press, the reporter tries to make sense of the President’s thinking process. The President’s flip flop came after recent market volatility and economic uncertainty about whether the US was headed to an economic slowdown or worse a recession. Given the strength of the overall economy, most people believe an economic slowdown would hurt the President at next year’s election.

The President also knocked down the idea of indexing for capital gains tax which applies to investors who sell assets which grew because of inflation. The President thought it was somewhat elitist as only a few percentage of Americans would qualify to use the indexing.

The President has been tweeting at the fed because he believes he was right that interest rates were raised too fast, too furious and the President now wants an interest rate cut.

Linking to dividend paying stocks, most leaders tend to let others float ideas that could be done; discussion is around the plus and minuses of the ideas and the economic and political possible outcomes. The President seems not to do this, he floats his own ideas and when he hears feedback will retract the ideas, which is an odd way to inspire confidence in the economy. It is sometimes amazing to consider the President has the ability to talk to any citizen about policy including those who are experts on both sides, but he seems not to. One hopes the company president of the companies you invest in uses a better network to make decisions.

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

Earlier this year there were two air crashes of the Boeing 737 Max jets and countries around the world stopped the flying of the jets. In turns out there were software problems in the jets and it was not an isolated little problem. The short term solution was to stop production of the 737 and airlines across the world lost money because the grounding of the plane made them cancel routes. It also turns out the regulatory body or FAA knew or was a little too cozy with Boeing before the crashes. At Boeing, as would be expected, the stock fell because in the domestic air space, the 737 Max was going to be Boeing chief generator of profits for the next 10 years. Boeing does also have a large military component and has other civilian aircraft which meant it was not going out of business.

In an article by Eric Johnson of Reuters, Boeing has told suppliers it will resume production of its 737 Max jets at 52 a month in February of 2020 and increase that to 57 by June. The schedule is dependent on the regulators approving the 737 Max to fly in the fourth quarter of 2019. Last month, the President of Boeing Dennis Muilenburg told analysts there was no guarantee when regulators would clear the production to ramp up again.

In normal times, production rate changes are usually incremental and communicated months or years in advance, but the challenge of the 737 Max has forced Boeing to scramble.

Linking to dividend paying stocks, all companies have divisions which are expected to grow and be cash cows for the company. From the outside, one would like to think the division has all the bells and whistles to ensure operations are as normal as possible, then something happens. The product or service is pulled from the market, the competition sets in and the stock price falls because of increased competition. In Boeing’s case, the competition is Airbus and they have sold more planes than Boeing, it will take time but given the nature of the aircraft industry they should return to what is consider normal. It does not happen all the time, why would it happen with your investments?

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