Most people know of Nelson Mandela who was the leader of South Africa. For over 100 years, South Africa had a system to divide the blacks and the whites because the whites were about 5 million in population and the blacks were 14 million and in the rural areas. In terms of the country, the Afrikaner, of Dutch decent ran the state – every cabinet minister, every army general, every police general, every senior intelligence officer was an Afrikaner. They also owned and farmed the land where 50,000 white farmers owned 12 times as much arable and grazing land as the country’s 14 million rural blacks. As keepers of the guns and food, the Afrikaners were the protectors of the rest of white South Africa.

Eventually the President of South Africa for a number of reasons handed the Presidency to Nelson Mandela. Since then whites and blacks are in Cabinet, nothing is perfect for anyone. Once Mandela took over the Presidency he faced a complex question of how to bring the country took to take the next steps. The country had all the elements of heavy internal violent divide, but Nelson Mandela tried to find ways to prevent violence. In South Africa he picked sports in particular the sport of rugby, there is a movie staring Morgan Freeman & Matt Damon and the book Invictus written by John Carlin published by Penguin Books, London, 2009. The sport of rugby was played, supported, talked about and passionate tales were told by white people. The black people played soccer (one of the reasons why the World Cup went to South Africa) and black people for the most part did not play or like rugby or the colors of the Springboks. The President brought the Rugby World Cup to South Africa and then the challenge was to get all of South Africa to root for the Springboks, spoiler alert they do. One of the more dramatic events is the plane just before the last game. The process is important or how he does it is what you can learn from the book or the movie.

Linking to dividend paying stocks, it is possible for items of established companies to go viral, but it is unlikely because they are part of the establishment. The challenge is to ensure people continue to use their products. The challenge is to continue to win over the non establishment by slowly embracing the good of the non establishment. For example the big brewery buys a craft brewery, this is good but the next thing they do is change the formula and roll out the craft national wide which a good craft brewery by definition can not be. The process in the operational aspect continues to be important or the how and why of the company.

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

In October and November the general markets went down, many of the big gains were taken back and investors ask why? Neil Irwin of the New York Times News Service believes there was no simple answer. The problem of no simple solution is what should policy makers do? Mr. Irwin believes the market is reflecting a number of risks that each one could be handled, but if they join together then there are fewer straight forward responses.

The stock market is down 9.5%,  but the bond market is stable.

The giant tech companies lead by FAANG are showing risks of slowing down, possibly new regulations but are still very profitable. Apple has bought back $80 billion worth of stock, Amazon announced it is going ahead with 2 offices in New York and Washington, DC. There is much to be positive about, but…

Oil prices have gone down, sending energy firms prices down although consumers are benefiting from lower prices at the pumps.

Sometimes investors worry about debt loads such as GE has if interest rates rise more than normal, but the fed has said it may not increase rates, although it does want to.

The trade war is still going on, although many companies have raised prices in anticipation of trade war effects on their balance sheets.

Economic growth worldwide lead by the expansion of China and Russia seems to be slowing down.

The housing market is not booming any more or is slowing down.

There are always reasons to be jittery about the stock market, however in the past many of the problems tended to be localized as the rest of the economy still moved onwards.

What the above tends to show is that adjustments tend to cause huge economic disruption only if there are compounding factors or inadequate policy responses.

What is the unknown is how do the risks react together to compound economic problems?

Linking to dividend paying stocks, while every stock owner would love to see higher prices, you can buy stock for other reasons. If you buy for the longer term ensuring you are protected by earning dividends, as long as the company is profitable then you will still earn a dividend. It is the time when stocks fall, the dividends can be used to buy more great companies at lower prices. You have the ability to have patience and overtime the prices will rise and you will be wealthier.

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

A number of months ago, the President started trade wars with all the large countries that trade with the US, saying trade wars can be easily won. A number of months and the trade war is continuing, so far there are no easy winners, just losers. In an article by Mark Weinraub and P.J. Huffstutter of Reuters titled US farmers leave crops to rot. In the world of crop growing, soybeans have been a cash crop, however with the trade wars China decided to fight back. China imposed a tariff of 25% on soybeans and last year the US had a trade with China of $12 billion. China’s portion of the US crop was 60%, that has gone to close to 5% or almost shut down exports. The US government rolled out an aid program of close to $12 billion and as mid-November over $800 million has been paid out. Over the next few months expect the number to rise into the billions.

Farmers typically deliver their grains to a silo owned by grain merchants such as Archer Daniels Midland, Bunge, Cargill but the silos are full and their is no buyer for the grains, Farmers are having to pay greater storage costs. If the farmers are not paying the grain merchants, they are buying grain storage bags or the large white bags seen on farms. For their is grain surplus. Farms are hoping the trade wars end by the spring so they have space and money to plant next year’s crop.

The other solution is to plow some of the crop back into the field, this will help make the soil more productive next year which is a good thing.

Linking to dividend paying stocks, depending on what your industry is, trade wars are never easy to win and can go on for years, until the country decides either it is desperate for your goods or cooler heads prevail so the trade war ends. In the meantime, adjustments need to be made, profitability generally falls, and when you examine your investments you may wish to look at alternatives not affected by trade wars.

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

 

Every year, in December they will be some selling and buying because of tax time and equally important making the year end results look good. The tax is the last day the capital gains can be locked into this year’s income tax filings. In addition there will selling to make balance sheets look good at the mutual fund industry because they need to be presented to clients. 99% of us invest to make money, while we all do not, if a fund is losing money at the end of the year, do you wish to hold it for another year? Maybe, but likely not this means the mutual fund industry has to make its accounts look pretty if they are not already. One can remember this years losers maybe next year’s best gainer. Although the adage is buy low and sell high, a remarkable number of people do it the other way – buy high and sell low.

Linking to dividend paying stocks, regulations often drives the industry and depending on the size of your portfolio, you may wish to take advantage of it. When others are selling, given you have done your homework, you could be buying.

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

We all need to eat food to survive and some need to eat it because they love food. Have you noticed food has changed? According to a book by Mark Schatzker called The Dorito Effect, published by Simon & Schuster,  NY, 2015. There are practical reasons for it – the crops are grown away from the area in the northeast where my home is, so vegetables need to have thicker skins to last longer. The good thing is whatever the season, just about all foods can be seen and eaten. The bad news in order to make this happen, over the  years the food has lost its flavor, water has been added and there are more carbohydrates in the fruits and vegetables. The food is relatively still healthy, but not as healthy as it was 20 years ago.

In order to add flavor large companies known for flavors have developed – companies with names such as Lawry’s, Griffith Labs, MCormicks, International Flavor & Fragrances are among many names. What they do is to provide the flavors which consumers including us believe we are eating something we are not, we taste the flavor and consume it anyways. It seems since we eat a lot of processed foods, the flavors are being happily eaten. Maybe one day the flavor will be better than the real thing.

Linking to dividend paying stocks, every year food changes, sometimes for the better, sometimes for the worse. To meet and expect expectations, food is added with flavors and other ingredients to help us become addicted or a sense of addiction. As processed food changes, then the investments may be better on the flavors rather the food for we still have to eat to survive.

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

 

For a long time, the heads of the auto companies for very good reasons were very high public personalities. The auto industry was large, it had new models every year and we were very open to the ideas of the auto industry. Times changed, people came in and left and outside of Ford which is still controlled by the Ford family you might be hard pressed to name CEOs of the auto companies. One name that might have come up was Carlos Ghosn CEO of France’s Renault, Chairman of Mitsubishi of Japan, Chairman of Nissan. He is accused of significant financial misconduct including understating his income. He was paid in the $17 million range plus.

According to an article by Eric Reguly, Mr. Ghosn and former CEO of Fiat Chrysler Sergio Marchionne believed the route to success required consolidation that would allow auto makers to save costs and achieve synergies by launching an array of models off common platforms. Recently Mr. Ghosn oversaw a large investment in AvtoVaz, the Russian car company that produces the Lada. The car is improved and is now Russia’s top car brand. This investment allow Renault to take an early lead in battery-powered models which account for 1 in every 4 electric models sold in Europe.

When Mr. Ghosn was charged shares of Nissan, Renault fell because of the unknown answer what happens to the partnerships and relationships. Mr. Ghosn had increased his power, but is it enough to continue the partnerships or will the car companies go their own way? Time will tell

Linking to dividend paying stocks, visionaries and power in CEOs can be a great thing, but one of the concerns of the Board and the people who elected the Board is succession planning. Who takes the reigns if something happens unexpectedly? When it comes to the next person, what stamp will they do or put on the company? If you are reasonably happy with the next round of leadership, then you hold your shares. If you are not positive, finding alternatives is a good thing to have in your decision making process.

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

In mid November, Amazon finally let the cat out of the bag and announced the headquarters locations were going to be in Queens in New York City and in Arlington, Virginia near Washington DC. The headquarters will change the skyline of the cities and if Amazon continues its growth will change the cities. In its hometown of Seattle, Washington Amazon has grown from 190,000 sq ft to 10.7 million sq ft of office space which is 19% of the prime office space in Seattle. In addition, Amazon has facilities across the country, but not head office jobs. In Seattle, the the 45,000 workers are paid an average of $110,000 as reported by the Seattle Times.

In an article by Matt Lundy, the reported wonders what will be the ripple effect? If Amazon grows to the same size or near the same size as Seattle, it will be the biggest tenant in New York and Northern Virginia At the moment Citibank is the largest tenant in New York with 3.2 million sq ft and the US Department of Defence has 2.8 million sq ft.

If Amazon achieves the growth expected or hoped for, New York City will be giving them a tax credit of $1.2 billion and Arlington will put up $573 million.

Linking to dividend paying stocks, if Amazon continues to be the largest company, it will continue to change lives of consumers and maybe everyone will be a Amazon Prime user. While it is expensive for the cities to offer money for jobs, the process that all the cities went through to bid for Amazon likely helped the cities figure out Plan B, if you do not get the locations. In that sense as an investor you should have a Plan B for what happens if your investment decision is good or needs adjusting.

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

 

The biggest home improvement chain suggested US home sales were slowing and impending trade tariffs could raise prices for its products. In an article by Aishwarya Venugopal of Reuters the company which sells more power tools, flooring and lawn mowers believes the next quarter will be lower, although the past quarter was stronger than expected.

Sales are still good at Home Depot with sales a stores open for more than one year up 5.4% beating the expectation of 4.38%.

The tariff question is products coming from China which the President may or may not add more tariffs. Home Depot has 3.5% of its goods coming from China up from 1%.

On balance the company continues to do very well with net sales up to $26.30 billion and net earnings to $2.87 billion or $2.52 a share.

For anything that happens in housing, Home Depot is a bell weather stock because it is a market leader in what people need to keep their homes in good repair and looking good. One of the many methods you can tell how good a neighborhood is doing is looking at the home renovations. What are regular people doing? Eventually you can translate the information in how is the company doing? Then other home work is required.

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

For a long time, utility companies loved big projects – their engineers believed big projects was the way of the future and sometimes they were correct and sometimes they were not. There were plenty of mishaps along the way with nuclear power and cost overruns but there seemed to be few alternatives. Now technology is working to solve electrical problems for everyone. As an investor if the grid is working, people are using electricity and paying their bills, then can be good with investing in the sector.

In an article in the Globe and Mail, Shawn McCarthy writes the provincial Ontario Power Generation company is teaming up with STEM Inc. an energy storage company to provide a battery based system to reduce electricity costs for industrial customers (and maybe some benefit to the residential customers).

STEM Inc on Millbrae, California is a market leader in using lithium-ion batteries with high end software powered by artificial intelligence in a system which stores electricity on site when power prices are lowest. It can then deploy the stored electricity to reduce the customer’s reliance on the grid during peak hours when prices are highest.

The advantage to Ontario Power Generation is new facilities are not needed to handle growth in the system. Those annual reports which suggests high demand and more power facilities needed, may not be needed as much. This saves the company money and allows them to ensure existing facilities continue to work well.

Linking to dividend paying stocks, one of the reasons why investors like utilities is the near monopoly they have in the generation of electricity which means the Utility Boards can raise prices to bear inflation and have a good return on investment. Utilities are large issues of bonds, if they do not need to build as many facilities, they issue less bonds and the stability of the dividends is almost guaranteed. The above example is one in which technology and AI are seemingly making life better.

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