In the decade there have and will be debates about climate change, from an economic point of view is what does the insurance world think? For an average person, they need to buy insurance if they own a car – can not renew your license; if you have a mortgage or a house – the financial institution requires you have insurance; and for a majority of people living paycheck to paycheck – the biggest part of their estate maybe the life insurance. We all look at insurance in different ways, but insurance is basically having a wide number of people in the pool and hopefully most do not collect early. If people collect too early, rates go up. If people collect too early and too often, insurance companies find different markets or raise rates so fewer people will buy. One of the indicators of climate change is the cost of natural storms – storms that bring rain, wind, hail, thunderstorms, flooding.

In an article by Michelle Chapman of the Associated Press, according to Swiss Re Group, one of the biggest Reinsurance companies in the world, in the first half of 2023, storms caused $34 billion in insured losses.

The storms in the US were so severe there were 10 that resulted in damages of $1 billion or more, almost double the average recorded over the past decade and Texas was the state hit the hardest. A series of thunderstorms was the most expensive single event in the US will the loss at $8.4 billion.

Reinsurers are the insurance industry’s insurers, covering losses that could upend an individual company. The biggest reinsurers are Munich Re and Swiss Re.

One of the lessons of going through a storm is to ensure the annual accounting for the cost of what is inside a building and what it would cost to rebuild or annual audits. In the case of Kerry Symons, of Perryton Texas one building had done its audit and the valuation was easy. Another building had not and months afterwards they are still discussing money.

It is noted State Farm and Allstate has pulled back offering insurance in Florida and California. Travelers lost money and AAA has pulled back in hurricane states. This leads the only insurance as a state insurance which was designed to be a last backstop. The state offers something but not replacement costs.

Linking to dividend paying stocks, when you decided on an action you need to watch the monetary flows. Is money flowing into the company or out, people vote with their feet and their wallets or they may say one thing but do another when it comes time to spend. With dividend stocks, you need to watch the cash flow to profits to paying of dividends.

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

Every government announces big plans for the economy, most of the plans gather dust as the existing companies use their existing facilities to expand or continue with the economic plans. Once in a while, companies have the ability to go anywhere to build or expand, an opportunity has come with the Chips Act. The $52 billion Chips Act is intended for companies making chips for computers to build them in the US rather than Asia. Where will the companies break ground to build?

In an article by Cecilia Kang and Ana Swanson of the New York Times News Service, one state has implemented an action plan to lure the companies which will provide long term jobs, the state is Indiana.

Indiana is not the first choice, because states such as Arizona and Texas have existing chip plants. Indiana has little experience with the complicated manufacturing process, but they wanted to catch up. The push is led by Senator Todd Young, Republican, who was a co-author of the bill.

The federal government was looking for 10 sustainable tech hubs. Indiana does have advantages. The state has ample land and water. Purdue University has an engineering school to turn on the researchers and technicians needed for chip production.

In January 2022, Indiana lost out to Ohio for plans by Intel to build 2 factories valued at $20 billion. Brad Chambers, Indiana’s commerce secretary said they learnt some lessons in terms of an attractive package of land, infrastructure and workforce programs. In 2023, the state landed SkyWater’s $1.8 billion investment for 750 jobs.

The land is 24,000 acres of corn and bean farms, the state has been buying for a tech park called LEAP Innovation District. The installation of water and power lines has begun and talks with companies such as SK Hynix and TSMC have begun. The attractions are relatively cheap rent, tax incentives, access to labs and researchers at Purdue University and training programs at the local community college – Ivy Tech.

In May, the first tenant arrived Eli Lilly, the giant pharmaceutical company.

Linking to dividend paying stocks, to be consistently profitable companies need to work with governments at all levels to ensure they have the ability to use the talent in the communities they are located in. Colleges and University programs are very important for people to move into the industry with the skill sets required, there is a very good reason why companies donate money to colleges and universities. For your investments, why schools are they donating to?

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

Most of us work in one industry or another and do not really know what is going on in other sectors of the economy. All industries abide by the rule to stay in business need revenues to exceed expenses. It is relatively simple until you add debt into the equation, if debt is too high it is very difficult to get revenues exceeding expenses. If you have gone on a highway drive, among the many trucks on the road were yellow ones which allowed people to see them.

In an article by Wyatte Grantham-Phillips of the Associated Press, in mid August the trucking company Yellow Corp declared bankruptcy or Chapter 11 after years of financial struggles and growing debt. In August the Nashville based company had 30,000 employees across the US as well as debt of over $1.5 billion.

3 years ago, the company received $700 million in pandemic-era loans which means the government is one of the many creditors. The loan was given on the basis of national security.

Bruce Chan, research director at Stifel, said the financial chaos at Yellow is likely 2 decades in the making pointing to poor management and strategic decisions dating back to the early 2000’s.

22,000 of the workers were unionized under Teamsters and general President Sean O’Brien called the news unfortunate but not surprising.

Linking to dividend paying stocks, as an investor you do not want to hear the words it was not surprising negative results happened. If the results are surprisingly good that is different. Part of the reason not to hear not surprising is doing your homework. If you are investing in an industry that you know only know a little about, you need to read reports or watch videos on the industry or talk to people in the industry and find out why it is a good investment. If you are thinking about the long term when making a decision this will allow you use to patience. A good company will still be there in another quarter.

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

When you read the heading, you are thinking about the world’s shoppers and potentially that is a large market, but reality is you will not likely sell to most of them. In pitches to potential investors there is generally a wow factor, how the market is x amount and if the product or service captures just 1% or more even a little more, the revenues and profits will just flow in. You do not have to look very hard to find numerous pitches that sound like the above, what you need to hear are about real numbers and why the product or service is going to capture those sales?

In a book called Six Billion Shoppers by Porter Erisman published by St. Martin’s Press, NY, 2017 the issue is how will shoppers be captured by internet shopping. During the pandemic, the number of online shoppers climbed dramatically, and some companies benefited, and some companies were left by the wayside. The book was written before the pandemic but does help explain under what conditions online shopping will tend to grow.

In North America and parts of Europe, the mall and the acceptance of the mall and supermarkets normal retail business. In the book, the author describes different countries and regions and how they shop. For them to become online, how does it happen?

In most countries around the world, the shopping experience is dominated by thousands of small independent stores who over the years have determined how to stay in business. In most countries around the world, the infrastructure – the roads, the highways, the distribution channels, and the phone system are not as good as the US. For that reason, there was limited choice for shoppers. With the invention and continuing lowering of prices of the cellphone, choices open up. Due to the cellphone, millions of people that were unbanked are banked and they have access to a phone. If your choice was to deal with a moneylender and now there is the ability to use the phone to pay bills, what would you choose? That was the choice in many countries and with cellphones monthly rates declining many other services come forth. There is opportunity, but according to the author shopping has to be catered to the fashion which people traditionally shop. In India, it tends to somewhat chaotic, or at least from the outside. When a mall was opened up, it was too quiet and people needed to hear more chaos for the mall to have customers. The owners lost money then realized he needed to hire more workers to make the mall seemingly a little chaotic and achieved success.

In a previous post, there was a post about a book called Bank 4.0.(you should see the You Tube media talks), the change of the bank leads to change in shopping online. If a company is going to sell online, it has to determine how customers will shop and how to ensure the distribution works in the company. In many countries, the infrastructure in the US of the Postal Service, FedEx, UPS and the rest of the suppliers do not exist, but other channels could work.

The author Mr. Erisman provides a wealth of detail of the trends and what can work in different countries and many are different. If you see a company doing a one size fits all, watch it lose money, just try to ensure it is not your money it is wasting.

Linking to dividend paying stocks, you invest in these types of companies because they are successful and can generate profits. It is harder than you think, but fortunately for you the companies report quarterly, and you can measure how they are doing. If you believe they are following the correct strategies, then it helps to be a passive investor. If you are suspect, find alternatives. Reading a book such as 6 Billion Shoppers can help you formulate questions.

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

In the movie My Fair Lady, a professor bets a friend, he can teach proper English to a flower girl and present her into upper society. In the movie, he does and then there are consequences what happens to the girl? In addition, her father inherits some money, and he sings a song about middle class morality or values. Before inheriting he had less than middle class values or living day to day. Now he has to think about tomorrow. Every society has values for its citizens to live by and they teach the public what is good and not so good. Values can and do change, sometimes it is the economy of the country which influences them.

In a book called Butler to the World by Oliver Bullough published by St. Martin’s Press, NY, 2022 the values of Britian have changed and Mr. Bullough would suggest not for the better. During the Victoria times, Britian or UK or England emerged as the most powerful country in the world backed by the British Navy. At the heart of the success was trade which brought raw materials to the ports to be transformed into goods to be shipped back to over 2/3s of the world’s population. The British institutions became the most important in the world because of the resources to maintain and enhance them. After WWII the empire fell apart and the wealth that flowed to Britian fell. What was the country to do?

The country tried to maintain some semblance of power by seizing control of the Suez Canal which connects the Red and Mediterranean Seas or the short cut between trade from India and Europe. To seize control the British sent in the army to run the government of Egypt. If British could not control India, at least it could control the sea routes. It was the top reason why General Nasser led the revolt to change governments in 1952.

After Britian could not control the seas, what could she control. In Mr. Bullough’s book, the British economy moved slowly at first now it is a given to help the world’s worst people launder money and ensure the global powerhouse of the City remains a powerhouse in financial services. Within the billions of dollars that are traded in the City are what middle-class morality says is dirty money and the institutions of the banks, hedge funds, insurance companies, law firms help to ensure the money is not dirty. Some of the clean money pays for expensive real estate in and around London.

In the old movies, one of the middle class moral sins was gambling. In the online world, one of the most profitable industries is online gambling and some of the biggest firms are formerly based in London. If you are a sports fan, read the sporting advertisements for the names. At the time of the writing, many companies moved their operations from London to Gibraltar whose government welcomed the companies as they built new offices and provided employment to those living in Gilbraltar. The country is one of the tax havens of the world where domiciled companies pay no tax. The other tax countries mentioned in the book are British Virgin Islands and Cayman Islands. If you go to the Cayman Islands, you will see office buildings with many financial firms that are based in and around New York City.

Linking to dividend paying stocks, if you are in the position to enjoy a good income from dividend paying stocks it tends to mean you have accumulated money. At one point you will think can I even pay less tax on my income after going through the income tax. What will your middle-income morals think you should do? Open an account in a tax haven? It is relatively easy to do. If you own a company that has been a leader and has a downturn, at some point in time the old management will want to grasp at something that made them feel as they were the leaders again. Think of the reason why England took control of the Suez Canal and had to send an army to maintain it. It is wise to watch from the sidelines till management has changed, then you can nimble again.

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

Every large company has a profitable division and investors purchase the company expecting the revenues to flow every year. The division is not the primary reason for the company but either it evolved or purchased as a smaller entity and grew. It would be a powerhouse if the company either sold it or split it off, but the division continues to earn money. For nearly 30 years, the financial engine for Disney is ESPN.

In an article by Kevin Draper and Brooks Barnes of the New York Times News Service, very few people bought Disney because if own ESPN, but because Disney owns ESPN. However, the money it generated allowed Disney to buy Marvel, Lucasfilm, Pixar, 21st Century Fox, and while Disney is movies and theme parks, the consistent moneymaker was ESPN.

The issue is ESPN’s best days as a money generator over?

ESPN is the sports channel of Disney and in the first 6 months of 2023, ESPN generated $14 billion in revenue and $3 billion in profits. The problem for Wall Street are the revenue numbers were done 6% for the year before and 29% less profit.

The bulk of ESPN’s revenue comes from are called affiliate fees. These are the monthly fees that cable providers pay ESPN for the right to offer its TV channels to household subscribers. Last year around 71 million US households paid for a TV package that includes ESPN and those TV providers gave $8.81 a month to ESPN according to S&P Global Marketing Intelligence. In addition, ESPN brings in $2 billion in advertising.

A decade ago, the number of people with TV channels was over 100 million. According to PwC, the accounting firm, it is estimating the 71 million will fall to 50 million subscribers.

On the cost side, which is good for the profession sports league is not so good for ESPN, their costs are rising. For the NFL package, ESPN will pay an average of $2.7 billion for the next decade, a 42% increase. At the moment, Disney will pay $57 billion in future commitments to sport leagues. It is noted both Apple and Google’s You Tube are interested in sports programming.

Disney is consulting on what to do with ESPN.

Linking to dividend paying stocks, all large companies own divisions which make money and as long as they make money profits roll in. Similar to all industries there are changes for every industry, understanding which divisions are the large revenue generators will allow you to analyze whether to continue to hold or look for alternatives.

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

What the wise do at the beginning, fools do in the end, according to Warren Buffet. Who are the fools, Mr. Buffet is referring to?

In an article by George Athanassakos a Professor of finance and Chair of the Ben Graham in Value Investing at the Ivey Business School at the University of Western Ontario, the fools are retail investors.

In a research paper by Harvard University and Shanghai Stock Exchange, the panic on the Shanghai market in 2015 was examined. The number of retail investors buying shares at the peak was 7,100% larger than prebubble period.

Charles Kindleberger, researched bubbles and published articles, a typical bubble starts with good fundamentals. But prices start trading on speculation, which fuels media reports which means more people enter the market for fear of missing out. Eventually prices fall from panic selling. Some paid more than others and will takes years before markets ever recover.

The reason why there are bubbles is there is follow the leader process as households see that others are profiting for speculative purchases. There is nothing as disturbing to one’s well-being and judgement as to see a friend get rich.

According to the Harvard and Shanghai researchers, retail investors accounted for 78% of the volatility of stock returns. In the expansion phase, new retail traders accounted for 43% of the volatility of stock returns.

The large tech companies have risen in prices, is there a bubble or a change in society?

Linking to dividend paying stocks, the bubbles come up with a get rich quick message, if you wish to avoid the bubbles, try staying with profitable stocks which pay a dividend. There is a reason why you rationalize the trading multiples, and the dividend ensures as the price goes up and down, you receive monetary feedback. Bubbles will come and go, just remember most stocks on the exchange are not profitable, stay with the ones that are. If you happen to own stocks in a bubble, remember taking profits is good and reinvest in profitable stocks.

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

In many law cases, one of the over used phrases is follow the money. It is over used, but it is true. If you follow who had or would monetarily benefit, you can narrow the suspect pool to more plausible suspects. It is not a perfect method, but it helps. In investing, follow the money means asking where are people or individuals investing their money?

In an article by Summer Zhen and Patturaja Murugaboopathy of Reuters, global investors are increasing looking at other countries besides China to invest their money.

Reuters analysis shows a massive jump in the assets of emerging markets (EM) mutual funds and exchange traded funds that exclude China. The countries which or benefiting include: Mexico, India, Vietnam and Brazil.

Refinitiv data shows China focused mutual funds suffered a net outflow of $674 in the 2nd quarter of this year.

The ishares MSCI Emerging Markets exChina ETF, the world’s largest emerging market ex-China ETF whose biggest holdings are firms in Taiwan, South Korea and India attracted a record $1 billion inflow in the first half of 2023.

Data from Goldman Sachs showed that as of mid-July, foreign buying of emerging markets Asia ex-China equities amounted to $39 billion over 12 months, the first time since 2017, the buying exceeded inflows into mainland China equities.

Why is the money leaving China, because the Top 10 China-focused mutual funds slumped over 40% in 2021 and growth did not happen in 2022 or 2023.

The global supply chain is moving, and money is flowing into Mexico, India, Indonesia and Vietnam. There are reasons why the government of China is trying to stimulate growth in the country.

Linking to dividend paying stocks, for the past few decades investing in China was an easy thing to do and many funds paid well. In the US manufacturing moved from the US to China and now it is moving from China to other countries. The process is interesting to see how quickly the landscape can and does change. For the new manufacturing countries, growth will be easily seen, for China it has depend on a domestic economy including government incentives. For companies moving, it is in the best interest of the company not the country, and you are investing in the company. Follow the money is a good rule to see what is happening

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

Investor expectations is a very difficult phrase to define, but investors will know if a company did better than expected or not. The easiest way to describe it is through the Price/Earnings Ratio is a multiple. The stock price divided by the earnings per share. The stock is trading at 15 times earnings, if the earnings is good, the price should move up to stay with the 15 times ratio. If the earnings is not so good, the stock price should fall to stay with the 15 times ratio. All stocks trading on the exchange have investor expectations which are delivered quarterly. It is up to management to meet or exceed investor expectations or to ensure investor expectations are down if they are going to not meet expectations, without allowing more sophisticated investors the signs to say bad things are happening. One company that surpassed investor expectations was Amazon.

In an article by Chavi Mehta of Reuters, Amazon reported sales growth and profit ahead of Wall Street expectations as the company delivered goods cheaper and faster to shoppers, as well as cloud computing is looking good.

Amazon is the world’s largest cloud provider through AWS and online retailer.

CEO Andy Jassy said investors will see practical applications of AI in Amazon’s 3rd quarter.

Amazon’s revenue grew 13% to #134.4 billion compared to estimates of $131.5 billion.

AWS growth stabilized as customers shifted from cost optimization to new workload deployments. Its revenues were $22.1 billion.

Amazon had a quarterly profit of $6.7 billion.

Prime Day is one of the biggest sales day and Amazon has high expectations for the next one.

Linking to dividend paying stocks, all the large stocks have analysts watching the stock and trying to determine how it will do. Most of the stocks, the analysts will get right or within 1 or 2%, it is the quality of the estimates, however once in a while a company beats estimates and the price goes up. That is a good thing if you are selling, if you are not selling, it is nice thing. If a stock beats its estimate or does not meet it, you have to ask yourself why did you buy the stock? what kind of return were you hoping for? should I sell some now or hold on for a longer period of time. It is important to understand why you bought in the first place?

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