It is good to see GM making money for back in the 1950’s someone said as goes GM so does the country. For many years it was true because the production of cars lead to many people working. There were many spinoffs and GM had a number of lines which cater to people’s income and social status. For a long time many thought the lines would be true for as long as automobiles were being built. Then change came – prices of gas went up; people were interested in a quality vehicles and there was competition which slowly built up market share (the Japanese auto companies). Times changed but GM moved slowly.

In an article by Nick Carey and Joseph White of Reuters, GM is back on top and making money. There are still plenty of challenges, but GM is making money from high margin vehicles that have a truck base – trucks, SUVs, and crossovers. The US auto makers have sold more than 17 million units and GM expects that number to continue. In addition, the hurricanes in Florida and Texas caused many vehicles to be flooded which means new vehicles need to be bought as the insurance money comes in.

As an investor you need to look to the future and part of the future will be electric cars. Many years ago there was a movie called Did GM kill the electric car? the answer was maybe, this time the electric vehicle will be produced and where is GM in the mix? Some analysts believe GM test fleet of self driving cars can be converted into a lucrative robotaxi operation worth billions. The division is called Mavern which has plans for 20 new electric models by 2023.

Linking to dividend paying stocks, all companies go through cycles often they are highly influenced by the people in the boardroom, as you examined the companies ensure that the people in the boardroom have the ability to seek the best alternatives and not be content with sitting still or the status quo.

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

Coal companies are enjoying making money which they have not been doing for a number of years. In an article by Tim Loh of Bloomberg News who wrote about the coal industry in late October. US coal production is up and companies are trying to maximum shareholder returns rather than focusing on how many tons of coal they can dig out of the ground.

Investor interest is interested according to Jeremy Sussman of Clarkson Platou Securities Inc because the management teams are returning cash to shareholders as coal prices are at a level to make money. The other concern is from an operational standpoint are the results solid. Miners are benefiting from sustained high prices for both types of coal used by steel companies and power plants. The utilities which run coal power plants compare natural gas prices to coal, whatever is less expensive will get the larger share.

Coal’s long term future is unclear, it is helped by companies went into Chapter 11 bankruptcies and emerged with less debt and stronger balance sheets. Coal depends on China’s production (last year they slowed their production); it depends on electricity demand and demand has been flat and with alternatives of wind and solar helping to generate electricity, coal is needed but what are the growth prospects?

Linking to dividend paying stocks, coal is a commodity which means prices go up and down and when they are up companies make money, but cycles happen. There is and will be a demand for coal, but it is likely better to buy the customer or the utility which sells the electricity to consumers. The issue is the utility is regulated and often the regulator will raise prices and consumers have little choice but to pay more.

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

Most investors should know what the FANG (Facebook, Amazon, Netflix and Google) because these stocks have been some of the best performing stocks for the past decade. There is another group of tech stocks which has been performing extremely well and need to be on your watch list, if you do not already own them. The semiconductor stocks led by Nvidia Corp, Micron Technology, Advanced Micro Devices and Lam Research Corp have gained about 50% in the past 12 months. If your portfolio is not up by 50% then you need to consider these stocks.

Part of the reason for the chip sector is wherever you look there is a chip in the mechanical device. As consumers want their gadget to think for themselves or beginning of artificial intelligence; look beyond the phone and computer and you will see the potential for chips and the large chip maker.

Apple is designing its own chips. Google is designing its consumer-device chip and has designed its own co-processors to help with certain functions it its data centers.

Linking to dividend paying stocks, as our society transforms itself and all the devices we use there is money to be made and some of it is in the chip makers. If you do not own the stocks, put them on your watch list, and when there is a correction you can buy them at a lower price or use some of the dividends you receive to begin to buy. Then you will have the best of both worlds – growth and dividends.

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

 

Amazon bought Whole Foods and everyone in the retail environment knows and understands Amazon is disrupting the retail environment. When Amazon bought Whole Foods it had expectations for both expansion and new services that Amazon could bring to Whole Foods. This expectation raised the stock price and lowered the price of food retailers . Whole Foods has run into barriers that were not expected. Recently reported by Jeffrey Dastin of Reuters, Whole Foods wanted to lease space in a mall in San Francisco but similar to most malls, the largest tenant tends to pay less more in rent but tends to bring in people to the mall. In San Francisco, the City Center Mall lead tenant is Target and they said no to Whole Foods because they did not want to compete against Amazon. Whole Foods is making concessions if it wants the location.

Reuters was wondering is this mall an exception or the norm? It turns out, the strings attached is a norm part of the retail environment which was overlooked by most analysts. In the online world of Amazon, there are few constraints, in bricks and mortar there are many constraints.

Linking to dividend paying stocks, as our economy changes companies that disrupt one sector may not fit into the old sector where the rules are often tougher or seemingly under the radar. One can not take for granted just because a company is successful in one area, it will be successful in another area.

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

 

Recently attended a horticulture meeting about plants and animals preparing for the winter. In the northeast, the leaves have changed and with the November rains the leaves will fall and the weather will turn colder. For people in the Northeast – we all look towards going south for the sun and warmth. Birds fly south, but not necessarily because of the weather. The real reason why birds go south is follow the food. For every type of animal and birds, if you look at what they eat or what they like to eat, you will see the food change and the animals and birds simply follow the food.

Linking to dividend paying stocks,  there usually are simple reasons for many questions but finding the simple answer is not as simple until you know the answer. In investment, if the number one real is try not to lose money, then investing in profitable companies who can pay a dividend and ideally raise the dividend on annual basis. This should be simple, but it is complex because the investment industry loves growth and large organizations will have smaller growth than small companies. Consistent growth is better than quick growth if the growth is profitable growth. For smaller companies, there is hope to gain market share and then increase prices to make the company profitable. Watch the smaller companies but put most of your assets in profitable companies.

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

In what is considered the developing world, one of the most important institutions is the World’s Bank. Most people in the developed world believe the World Bank is a valuable institutions but we really do not know what goes on within the bank. A book about the World Bank was written by Sebastian Mallaby published by Penguin Books, London, UK, 2004. Although the book is a few years old, the issues really have not changed.

The World Bank was created after World War II, to help the reconstruction and development of the economies of the world and ideally not to go communism. What is now considered the G7 countries do the bulk of the funding of the World Bank. It lends about $20 billion a year and has a great influence over the developing world’s policies. If you are interested in development around the world – the World Bank has a great amount of information – work done by the World Bank professionals’ report – check out their website.

In the book, the author writes about the Jim Wolfensohn Presidency and his desire to change the World Bank to more proactive. The desire of Jim to change is evident, how he does it led to many stories about his form of management. When Jim arrived, the Bank was essentially lending money to pay the interest of former loans and not being proactive. Change happen and two success stories were in Bosnia and Uganda.

Framework for development includes 3 planks: The government should be clean or  limited corruption: an effective justice system to fight corruption; and a properly supervised financial system. If the 3 planks are not there, money will go to tax haven countries.

In the book, because it was focused on Jim and one can see how critical personal relations are to trying to achieve something good.

Another chapter discusses when countries currencies decrease. All countries currencies move up and down, but some will collapse faster than others. The currency of the country begins to go down; the IMF and the World Bank are supposed to buy the currency but often the process does not work. When a currency goes down, there is a linkage between corruption and a number of banks that gave loans to cronies of the President and many of the loans realistically will not get paid. This means the bailout goes to the banks who continue to loan money which is not going to get repaid. The system eventually collapses. The pattern has been repeated in many countries around the world. The next it happens short the currency.

Linking to dividend paying stocks, the corruption aspect of the countries are repeated in companies. When corruption occurs, companies revenues will drop and dividends will not be paid. If you see the pattern in a country or a company, look to short the stock or currency otherwise you will need to quickly seek alternatives.

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

If you back at the economy of the middle ages there were Lords and workers (serfs) as well as independent craft people. The names changed in the industrial revolution to owners and workers and in our service economy we are going back to the middle ages with exceptions. There are more service workers who own their own business or are entrepreneurs. 95% of them will make a living, only a few of them will become very rich but it is possible. If you ever worked in the government or corporate world – there was a wide variety of jobs but there were departments to take care of your needs. If you are an entrepreneur you need to do everything, until your company reaches a size where you have to learn to delegate more.

Arlene Dickinson who runs Venture Communications and is seen on programs such as Dragons’ Den in Canada has written a book about what is it like to be an entrepreneur and the title sums it up All In published by Collins, Toronto, 2013. To be an entrepreneur, one has to live and breathe your business 24 hours a day, 7 days a week till you can learn to delegate to someone. Whether you are an entrepreneur, at some point in our lives we all act like one for a short time. Ms. Dickinson dismisses the work/life balance – it does not exist because you are tilted in one direction. The ideal is your partners and support network know this and accept you anyways. As your business develops you will be able to understand the cycles of it and learn what is more important to you. When do you give your time to others – family? friends? You can make it work because not every day will the sales and pressures of the job be the same – similar to all industries some months are longer than others.

You will need to embrace the mess and know how to clean it up. Along the way you will need to change your leadership over people. If you hire people, those people you hire are the lifeblood of your company and they want the company do well, the issue is do they want to work for and with you? why? do you offer them challenges and ability to make profits.

Linking to dividend paying stocks, the ideal for these stocks is after you have made a decision to do nothing and let the dividends flow in. The stock price will go up and down but your concern is the dividends and you can set your cash flow tables to know when and how much money is expected and comes in. Then your task is to determine will the company continue to produce the dividends, at the task can be more high level – if the company is a utility company – is the region or city still growing. Yes then it can be a keeper. What is the expectation it will raise its dividend the next time?

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

 

In mid October, Bombardier a maker of airplanes essentially gave the division to Airbus to fend off a fight with Boeing. To provide perspective, the next time you fly look to see who the manufacturer of the aircraft is. If you are in large plane, it will be either Boeing or Airbus. If you are on a feeder line, it can be either Bombardier, Airbus, Boeing or Embraer, these four companies are based in Canada, France, US and Brazil. Airbus and Boeing have the market for the planes which fly over the oceans; Bombardier was trying to move up to the Airbus and Boeing space. With President Trump in office talking about American made jobs; Boeing decided to increase the price any US carrier would have to pay to buy Bombardier newest and latest planes (Delta has put in an order) and thus limiting the buyers and trying to drive Bombardier out of the space. The government regulators agreed with Boeing (all governments support their aircraft industry including Boeing receives about $15 billion in tax breaks a year and supports from the government) however the consideration was not Boeing but Bombardier and 280% tariffs were issued. (although Delta said they were not paying).

Then Bombardier did something unexpected, at least to Boeing, they made a deal with Airbus which has a plant in Alabama and can finish off planes for US content requirements. Airbus is Boeing ‘s competitor world wide and now in the 100 to 150 seat planes. For the passenger airline industry, Bombardier becoming a subsidiary of Airbus means one less competitor or typically higher prices for airlines.

Linking to dividend paying stocks, in this case Boeing used its influence to affect a competitor and tried to kill the competition. It either failed to see the alternatives left to Bombardier or did not see the alternatives. It must have been focused on one objective, have higher tariffs to make the plane expensive so it would not be sold in the US. The plane could be sold to other countries, but in the airplane business having a US customer helps sales in other countries (as a passenger, one would like to believe it is the higher regulatory requirements to operate the planes and if they pass the hours testing then it would be safe in other countries). To summarize, everyone has alternatives, some of them are harder to do, but we all have alternatives and companies can easily drive their customers and competition to doing something else. Be careful what you wish for when you target your competition.

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

 

The stock market is setting new highs and no one knows when there will be a correction, although we do know the markets tend to run in cycles. Recently Richard Thaler who won a Nobel Prize in Economics was promoting his new fund and asked about the markets. He says he is nervous, which can be a good thing.  In an article by Gordon Pape titled with shares running high, it is time to diversify, Mr. Pape examines some of the reasons the markets may correct itself.

On the positive side there does not look to be a recession coming, corporate earnings have been good, low interest rates remain, global growth continues and consumers are spending money.

What could tip the apple cart or push the markets lower?

Disappointing earnings – stocks trade on multiples based on earnings and if earnings are lower, then the market should correct itself. At the moment given GDP growth that should not be a major concern.

A major international debt default – as you look at the balance sheets of the G20 countries do see any likely to default? back in 1998 Russia did, but unless oil prices drop dramatically problem not.

Collapse of a too big to fail company – large corporations are a symbol of the strength of a company and the economy. When Lehman Brothers was allowed to go into bankruptcy everyone asked who is next and why are they not like the ones that are in trouble. In Lehman Brothers case the problem was real estate valuations – too high.

Protectionism – every country wants to protect their jobs and have access to markets where their countries who can pay for their goods and services. The world is a balancing act but at the moment, the US under President Trump seems to want all the advantages of trade and no disadvantages.

War – depends on the war, the markets react differently.

Linking to dividend paying stocks, while we all want the stocks we own to go up, if you take a long term view many will but there will be adjustments. Methods to protect yourself include buying fixed income or buying stocks which are profitable and pay dividends as they increase them over the years. In this fashion you have protection on the downside and gain wealth as quality stocks bounce back faster when there is a correction.

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