In every industry during the development something changed, we often believed the outcome of the industry changed the world for the better, but there were points along the way which may or may not could have been better. One example of this is the industry of sugar. If you are researching an industry it is often good to research the companies history as well as books that are not positive to the industry. A case in point is the book Sugar written by James Walvin published by Robinson, London, UK in 2017. The title of the book is Sugar – the world corrupted from slavery to obesity.

Most of us including me really like sugar, it plays an important part of our lives. The fact that most of like sugar means sugar has played an important part of the history of the world. Prior to the 1600’s only the wealthy ate sugar and if you check out pictures of Louis XIV of France, you will not see him smiling. He had no teeth to smile with, but he loved sugar. Something changed and by the 1800’s, sugar was one of life’s essentials even for the poorest of working people. Sugar has remained in that position to the present and into the future.

If you examine sugar consumption, people eat lots with the highest in sugar producing countries of Brazil, Fiji and Australia with the Aussies eating over 100 lbs per person each year. Most of the sugar comes from cane sugar, sugar beet and corn or chemical sweeteners.

The problem with sugar is local sugar planters had labor shortages. The work is hard and for generations it was not mechanized expect in the mills to crush the cane to become usable for the consumer. The work was done by imported indentured labor but there was not enough of them and the plantations turned to the slave trade.

Sugar was first developed in Southeast Asia and China from the Ming dynasty traded the product including with Marco Polo. The crop came to Iran and Iraq through the Muslim empire across the Mediterranean into Spain. During the First Crusade, sugar cane saved Crusaders in times of starvation and nurtured a sweetness which survivors took home with them. The volumes of sugar production was small and the price expensive but the wealthy like sugar. At this time, if you check old movies the servings included the sugar bowl.

When Europeans discovered North America, after they looked for gold, they planted the crops from home and one of the crops that grew well was sugar cane. The pattern was to use the local indigenous people as labor to help clear the land and for cultivation. The next process was to bring in foreign labor. The people came from Africa and India.

The process began in Brazil and Brazilian sugar arrived in volume in Europe in the mid 1600’s. The mills were primarily in Antwerp (Amsterdam), Hamburg and London. The number of refineries in Antwerp increased from 40 to 110 between 1650 and 1770.

Until 1630, Brazilian sugar had no competition, at that time France and England acquired colonies in the Caribbean Sea. The islands of St. Kitt’s, Barbados, and Jamica were soon supplying English sugar while St. Domingue or Haiti was supplying French sugar. Sugar cane grew well and by 1770 over 90% of the 200,000 tons of sugar for Europe was coming from the Caribbean and two colonies Jamica produced 36,000 tons and St. Domingue produced 60,000 tons.

The sugar plantations were highly organized systems. The enslaved work force, like every acre of land was tabulated and regulated. Plantation paperwork, the ledgers of the plantation bookkeepers, documented every aspect of plantation life. Everything had a cost and a value.

Few questioned slavery, here was a system driven forward by sugar which yielded abundant wealth and wellbeing for everyone except the slaves. The volume of sugar brought down the price and the cost to buy sugar was affordable to everyone. In addition, in the military a sugar ration was given to all soldiers daily. Sugar was found from the highest priced shops to the local shop in towns and villages across the country.

Linking to dividend paying stocks, when you invest in a company, you are hoping they do well for their employees because often you do not work there. Your focus is the return on the investment or ROI, you see the returns and how the entire process works is less material to you as long as it is legal. Now days one hopes there are better ways to do the manual work and technology is continuing to improve which puts less strain on manual work. In our world, we may think would that have happened in the present time and the reality is it likely does. With every investment there are benefits to the investee and something negative about the industry, hopefully the negative continues to fall.

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

The oil patch has been an important driver of the economy for other 150 years and many people have invested in oil companies and the successful ones have paid dividends for centuries. At one time John D Rockefeller and Standard Oil controlled the world market but it was broken up to become the 7 sisters – Standard Oil of New Jersey became Exxon; Standard Oil of New York which became Mobil; Standard Oil of California became Chevron; Texas Oil became Texaco; Gulf Oil which merged with Chevron; Anglo Persian Oil which became BP and Royal Dutch Shell or Shell Oil. For generations, BP was the biggest dividend payer in the UK; Shell was the biggest dividend payer in Netherlands; Exxon was the biggest dividend payer in the US. The above points out investors receive lots of money from the oil industry. But how much?

In an article from Reuters, Ernst and Young wrote that spending on dividends and stock buybacks of the top 50 independent oil and gas producers hit $58.8 billion, topping the $55.1 billion allocated to exploration and development.

Combined profits of the group which includes DiamondBack Energy, Pioneer Natural Resources, and ConocoPhillips to $333 billion, over 30% more than $217 billion in 2014.

Last year’s investor payout was up 214% over 2021 and more than sevenfold over 2020.

Bruce On, a principal in EY’s strategy and transaction group, expects the trend will continue and a new outlet for the cash is acquisitions.

Returns benefited from strong oil and gas prices and a cost-consciousness that emerged after energy prices collapsed 3 years ago. Profit per barrel was $32 compared to $10 in 2014 when energy prices were about the same level as today.

Linking to dividend paying stocks, in our economy one can expect oil and gas industry to continue to make profits and pay dividends. Which company is the best choice is up to each investor but a profitable industry which has a long history of paying dividends is worth owning.

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

Most of us tend to be plodders, there are those who embrace the latest technology and know the companies that are leading edge, but most people tend to need a focal point to understand what could be. Sometimes what could be means what is, will change or could easily change dramatically and that has consequences, but it also has many benefits. No one knows until a few years down the line. When Apple came out with the first smartphone, people began to use it differently and the applications on the phone has changed the world to be a better place. If you considered half of developing world now has access to credit, before they only had access to money lenders at high interest rates. There are always benefits to some and many times to many and consequences for industries. If you think about cable companies and the move to streaming on smartphones. This year the defining focal point will be ChatGPT and the uses that are coming. To use ChatGPT, means an infrastructure will have to be in place and the company that is leading that process is Nvidia.

In an article by Don Clark of the New York Times News Service, the infrastructure has taken at least 10 years and it happens Nvidia made most of the correct decisions. Think about other larger chip companies who are not where Nvidia is, and the questions is why Nvidia?

Over the past 10 years, Nvidia has built a nearly impregnable lead in producing chips that can perform complex AI tasks such as image, facial and speech recognition as well as generating texts for chatbots such as ChatGPT. The company achieved dominance by recognizing the AI trend early, tailoring its chips to those tasks and then developing key pieces of software that aid AI development.

Jensen Huang, Nvidia’s CEO has offered customers access to specialized computers, computing services and other tools of their emerging trade. That has turned Nvidia into a one stop shop for AI developers.

According to the research firm Omdia, Nvidia accounts for 70% of AI chips sales and holds an even bigger position in training generative AI models.

Daniel Newman, an analyst at Futurum Group said customers are willing to wait up to 18 months to buy a Nvidia system rather than buy an available off the shelf chip from a startup or another competitor.

Mr. Huang, said we understood that the reinvention of how computing is done and we built everything from the ground up, from the processor all the way to the end.

In 2006, the company announced software technology called CUDA that helped program the GPUs for new tasks, turning them from single purpose chips to more general purpose chips.

In 2012, researchers used GPUs to achieve humanlike accuracy in tasks such as recognizing a cat in an image. Nvidia responded by turning every aspect of the company to advance this field. This effort has cost $30 billion in the past decade.

Besides collaborating with leading scientist and startups, Nvidia built a team that directly participates in AI activities such as creating and training language models. This lead Nvidia to develop many layers of software beyond CUDA which saves labor for programmers.

Nvidia is focused on the large customers and data centers and its chips are relatively expensive the H100 costs between $15,000 and $40,000 which is 2 or 3 times higher than the A100. However, Mr, Huang says if you can reduce the time of training to half on a $5 billion data center, the savings is more than the costs of the chips.

For smaller companies, companies such as Inflection AI and CoreWeave which allows computers to rent time on their computers rather than buying the chips.

Linking to dividend paying stocks, at the moment one of the reasons you want to own Nvidia is because it has the largest market share in chip manufactures for data centers. It is important to remember IBM and Intel had the largest market share in the past. Cycles happen and Nvidia made deliberate choices to concentrate on the promising AI market. That market was seen in the select government institutions but was not in the general public. Eventually the general public will have access to Nvidia chips and new competitors will rise, for now enjoy the ride and ensure Nvidia is continuing to be the choice for AI developers. If not look for alternatives.

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

Most readers know about Amazon, FedEx, UPS and US Postal Service delivery service which brings parcels to your front door. When you think about the logistics, from warehouse to box to plane to van and to your door. Most of think about the last piece the van to your door because that is our immediate contact. However, there are companies that evolve around the plane or air cargo shipments.

In an article by Tim Hepher, Lisa Baertlein, Allison Lampert, and Valerie Insinna of Reuters, the people who run the cargo business are facing extra challenges now that COVID has passed. When COVID shut down passenger travel, the planes were flying but they were carrying cargo. Ever since planes have been flying, cargo has been a mainstay of profits. The early airlines were dependent on the revenues they made from carrying mail for the postal service. The mail was dependable and needed until the general public became familiar with flying cargo was the mainstay.

Jumping to the present time, during COVID, air cargo enjoyed record demand and when there is record demand it tends to mean higher prices for shipping. Since the end of COVID, demand has fallen, there is extra capacity in the system and freight rates are not going as much as costs.

When a passenger jet takes off, the lower level where passengers do not go is filled with cargo. During COVID, the airlines expanded the cargo space and now servicing passengers has taken back the space.

The global air cargo industry is worth about $200 billion a year.

Norwegian cargo analytics firm Xeneta, said in the next few years, shippers rather than the airlines will have the bargaining power and expect prices to decline.

An example is Western Global based in Florida recently filed for Chapter 11 protection. Even though Western Global does outsourcing for the US military. The carrier said the concerns are the unyielding and rapidly macro-economic headwinds that plagued the entire air-cargo transportation sector starting in late 2022.

According to data supplied by Xeneta, it costs $2.30 airfreight for 1 kilo (2.2 pounds). The price on the spot market is down 35% from last year and down 50% from the peak in 2022 of about $5.

The two big airlines Boeing and Airbus sell planes to shippers. Cathay Pacific, the 5th largest cargo carrier, has postponed a potential $2 billion order with Boeing. However, both Boeing and Airbus said 20 year demand forecasts for more than 2,000 new or converted planes remained intact.

Linking to dividend paying stocks, most readers work in a specialized industry, however in most industries the rules of supply and demand remain intact. If the industry is largely commodity based, the rules fit very well. If the industry is regulated, prices can increase according to inflation and supply and demand (for example utility prices). Understanding the business can make you a better investor.

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

During the month of August, one of the premier sporting events was the woman’s world cup played in Australia and New Zealand. In many aspects, the tournament was very successful about 2 million people paid tickets, for game between Australia and England approximately 70% of the TVs were tuned into the game and if you did not know Spain beat England 1-0 to capture the title. Behind the scenes is where sports can be interesting, if you watched the game the jerseys of England and Spain as well as all the other countries had a brand on it, what was the brand?

In an article by Katerine Masters, Amy Tennery and Helen Reid of Reuters, two of the largest sporting apparel manufacturers were represented in the final. Nike sponsored England and Adidas sponsored Spain.

In 2019, the last Woman’s World Cup, the US won the cup and Nike’s home jersey became the top-selling soccer jersey, for both men and women, ever sold in a single season. Nike executives told investors. Overall revenue in the 1st quarter after the tournament grew 10% including double digit growth in woman’s business. Sales were made after the tournament.

In 2019, the woman’s apparel business was 4 times it was in the 2015 world cup.

Of the 32 teams in the tournament, Nike had backed 13 teams and Adidas had 10.

Australia was the co-host of the tournament and their woman’s team went to the semi-final. This translated into 13 times as many jerseys were sold were compared to 2019. The semi-final game was the most watched TV in 25 years with up to 11.15 million viewers.

Adidas said it sees continuing demand for Spain jerseys and came out with celebratory apparel.

Linking to dividend paying stocks, in sporting events the appeal has to translate past the normal audience that will tend to go to or watch the game. When the public catches the event, many will pay for something to remember the game or the experience. In Australia, there was a large marketing promotion, but the Australians believed in the magic of the team and regular people made a difference. Companies send millions of dollars on trying to find the magic and you only know when it happens, but when it happens consumers open their wallets. Hopefully for a sporting event you have been caught up in the run for the magic. As an investor, if you see it, there are ways to make some money along the way, there are opportunities to be found.

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

Sometimes companies do everything they can to do a mutually agreed merger and the government says no. One can easily imagine the CEO has identified companies to merger with, lined up the financing, reach out for a friendly merger, and then went to the government agencies for them to sign off. Many times the process works seamlessly and people do not hear about the process.

In an article from the Associated Press, Intel wanted to buy for $5.4 billion an Israeli chip manufacturer called Tower Semiconductor.

The deal required approval from a number of regulators worldwide, including those in China. The Chinese did not want to sign off. There was plenty of lobbying, for example Intel’s CEO Patrick Gelsinger went to China to win over the Chinese. Intel had hoped to use Tower to expand manufacturing capacity and open up opportunities in the US, Israel, Italy and Japan. In China the regulator was China’s antitrust regulator, the State Administration for Market Regulation.

The problem for Intel was China imposed export controls on 2 metals used in computer chips and solar cells. In the US, the government has tightened controls and imposed restrictions aimed at China’s production of advanced computer chips.

Intel has to pay Tower Semiconductor $353 million as a breakup fee, however Tower CEO Russell Ellwanger said we were excited to join Intel and appreciate the efforts of all parties.

Linking to dividend paying stocks, sometimes companies can do all the right things, but government policies get in the way. When policies change, the merger could go through but until then it is a lost opportunity. On a friendly merger, there is always the prospect of a next time when things do not go right.

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

If you look at pictures of China of 20 years ago and now you will notice a great deal more high rises both commercial office towers and apartment complexes. As China expanded its infrastructure system and people moved from the country to cities there was great deal for housing and being China, the government encouraged the building of the complexes. However, since COVID when the government shut down the economy for months, China is experiencing a downturn in its economy. For decades the only numbers from the government were about growth, with a downturn comes in companies not paying its debt.

In an article by Clare Jim and Shuyan Wang of Reuters, China’s largest private real estate developer is seeking to delay payment on a private offshore bond for the first time. What will Beijing do?

Adding to worries about contagion risk, a major Chinese trust company that traditionally had a large exposure to real estate, Zhongrong International Trust Co, has missed its repayment obligations on some investment projects.

In China, the trust companies are known as shadow banks and is roughly a $3 trillion industry. JPMorgan in a research paper said the rising trust defaults would drag the economy down by 0.3 to 0.4% points directly. It also expects a vicious cycle of real estate financing challenges.

Chinese President Xi Jinping has signaled he wants a different type of economy – one less dependent on government money propping up real estate values and funding infrastructure development. He wants high quality growth. He would perfer real estate companies fund their developments with up front sales.

China’s problems have been brewing for a number of years with the problems of aging labor force and high government debt, particularly at the local level. For years the country has kept the forces at bay with high government spending that often found its way into the housing market. Beijing has been stating housing is for living in, not speculation.

Country Garden has 3,121 projects outstanding and China Evergrande Group has 800 which translates into over 1 million houses and apartments under construction.

Country Gardens bonds are trading on less than 10 cents on the dollar and Evergrande has declared Chapter 11 bankruptcy.

Linking to dividend paying stocks, property companies use debt to finance construction and as long as they can pay it off, all is good. When property values and markets go into a cycle, there are concerns and for the most part investors are better to find alternatives and watch till the good cyce returns.

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

In every industry there is a leader, and it always seems the leader has the breaks or beats expectations regarding its stock price. For the outsider looking in, it seems the company is well managed, profitable and it has the correct people in place no matter what the economic cycle. Then something happens and the stock begins to underperform and the questions about leadership surface. Eventually the person who everyone wanted in the top job, the differences come to light, is this the person to lead us?

In an article by Rob Copeland of New York Times News Service, the CEO of Goldman Sachs is a wonderful illustration of the above. Under previous management, Goldman Sachs was seemingly an advisor to every government in the world, its trading desk both for trading for Goldman and trading for outside clients was making lots of money, the new issue desk had many clients wanting to go public and the company stock was doing very well.

This year Goldman Sachs is not doing as well, the company tried to make money in consumer banking but has lost money. Trading activity is down on Wall Street which means layoffs have happened, the stock price is down and people look towards the CEO.

Every CEO has many positives and a few negative points, but the Board of Directors pick the CEO they believe will lead them well. When things are not going well, people look to the CEO for direction, but according to many, David Solomon does not have the personality which gains the loyalty and respect of his subordinates. If you are looking for a guy to pat you on the back, Mr. Solomon is not that guy, he is direct and focused on results.

Often times people will examine how the CEO spends his time outside of the day job. One of the things Mr. Solomon likes to do is be a DJ. He relaxes at private resorts owned by a company he has personally invested in.

Goldman is not likely to change its CEO for Mr. Solomon has held the job since 2018 and is the 10th CEO in 154 years. The CEO typically lasts for 15 years plus. As well as Goldman’s clients are still trading and working with Goldman.

Linking to dividend paying stocks, it is relatively easy to invest in a company when it seems it is the top company and has been for a number of years. As a top company, people say almost anyone could be the leader and the company would make money. It is never quite true for every profitable company needs to ensure the way it generates its profits continue and are consistent for the future. What services or products are profitable and who pays the bills? Having determined the answer you can determine will the people paying the bills continue? If the answer is a resounding yes, you can do nothing? if you are not positive seek alternatives.

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