In the world of stock markets, there are multiple players who range from individuals with a small amount in their account to billionaires; on the institutional side – money managers include pension funds, mutual funds, index funds and a whole host of others. When people discuss the stock market they are typically discussing one of the above – individuals or institutions. Generally the institutions are into wealth preservation; while individuals are about growth until a certain number means they want wealth preservation. In between are traders or day traders and hedge funds

One aspect of a company becoming public or selling its shares is it has to share its overall data with the general public. Within the general public will be analysts looking at the past and trying to forecast what will happen if the company continues along the path it and every year it seems easier to forecast. During earnings season, the analysts will get it right 99% of the time. For the largest companies, there will greater scrutiny, an example is Amazon.

In an article by Arriana Mclymore of Reuters, the expectations of Amazon was written about. Amazon has a number of business units, although its e-commerce division is what the public knows most about the company. The company also generates income through cloud services, ad revenue and because of its size signals the health of the American consumer, which helps when 2/3 of the economy is based on the consumer spending money.

The cloud services is called Amazon Web Services (AWS) and is the most profitable division of Amazon. For a number of years, it had the largest market share and investors want to compare it to Microsoft and Google’s growing web services. In the first quarter, Amazon’s CFO Brian Olsavsky said there was pullback in growth of AWS because its enterprise customers were being cautious in their spending.

Amazon sells lots of ads, along with the Big Tech companies, Google reported a 3.3% increase to $58.1 billion, ad sales at You Tube was $9.51 billion. Estimates are $10.3 billion for Amazon.

Prime Day sales are the core of Amazon shoppers, Amazon delivered more than 1.8 billion units the same or next day, which is 4 times faster than in 2019. Doug Herrington, Amazon chief executive of worldwide stores, said that creating a regional fulfilment network, placing products closer to shoppers and expanding its same day delivery have reduced costs for consumers and the company.

Amazon’s profit margin was 46.77%, but analysts expect 46.53%.

Amazon is increasing the number of 3rd party sellers on its platform. Vendors can purchase ad space in search results and use other tool’s to catch customers’ attention in an ocean of products.

Linking to dividend paying stocks, when you buy these types of companies one of the very good assurances you have is the companies have a long history of making profits and coming in around the estimates that Wall Street believes it will be. There are many people examining the future of the company and as long it executes, then the estimates tend to be correct. When they are not correct, if they are worse, it is time to find alternatives; if they are better then capital gains are coming.

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

Societies change over the years, but some things will always remain the same. When the US was founded, most people lived in small towns and in the country and their livelihood was farming. During the industrial revolution there was a migration from farming to urban living to work in the mills or work for someone else. Then the economy changed to a service economy or people worked for someone else but in an office setting. Now we have an economy that people do a wide range of activities, although they all depend on one thing – cash flow.

In a book called Business for Bohemians – Live Well, Make Money by Tom Hodgkinson, published by Portfolio Penguin, London, UK, 2016. Mr. Hodgkinson is publisher of a magazine called The Idler.

Bohemians want to enjoy our work and enjoy our everyday life and make a living from it, all at once. We want to be creative. We value freedom over money. We are those naive souls who want to turn our passion project into a business.

However, there are always questions with what is the intention of the business or the point of it all? Do you crave wealth? freedom? communicate a message? fun? help people? satisfaction of your job? do your want to own a small business? if it is successful how big?

Bohemians affect disdain for Mammon. They live for art and life, however if you do not pay attention to cash flow and paying bills, you will be bankrupt. The idea of business is to make profits, what you do with the profits is the rest of the story.

If you decide to go into business and the idea of the business is to be sustainable or make money for you to do the thing you love doing, it is very good idea to start with a business plan. This will focus you on your revenues and equally important the expenses – both fixed and ongoing. With a business plan you can communicate the ideas to others who could or might support you – friends, family and funders including banks.

Part of the business plan asks who are your customers? who will buy from you and how will you reach out to them?

Who is going to be on your team. Yes, you will do most of the work, but you cannot do everything. One of the most important jobs will be the bookkeeping and maintaining your eye on the profit and loss (P&L) numbers. Spreadsheets can track the numbers in real time. You need to keep what comes in and what goes out tightly controlled. In the old days, people wrote cheques, now there are many instant transfers that can happen. Understanding your revenues versus expenses is how fast you pay bills. Note every year, all the forms to run a business are a little easier to access, a little easier to do.

Get the Price Right and Get Paid. Pricing in every industry is very tricky, most new businesses undervalue their prices which means they barely breakeven. You have to understand what price for your product or service, because anyone can give stuff away. It is better to be higher, than low. If you are higher, you can always have a sale or change pricing to move product along. Margins are important, do you know what yours are?

It terms of selling, you must genuinely like what you are selling. You must have a website – companies such as Shopify and Amazon have templates. You will learn what one works best for you, allow time to learn. Often people sign up for social media, do not spend money chasing likes and retweets, use your time to create an engaging piece of creative content.

Keep track of your customers, they bought from you once, they likely will buy from you again. There are relatively easy programs to maintain mailing lists.

As a business owner, you will negotiate. Learn and follow some rules – do not negotiate with yourself; do not get too attached to a particular outcome – if you are not prepared to walk away, you are powerless; take your time; put the relationship first; seek first to understand; if the other party is still talking, they are still negotiating; give options and signal the negotiations are finished, fail sometimes.

How to Choose who you work with – of all the means to ensure happiness throughout the whole life, by far the most important is the acquisition of friends Epicurus.

In your business, you will hire and fire people, the hiring is the most pleasurable. The firing will be needed and is the toughest decision you will do. You have a desire to do good, but the person you hired is not working out, they are costing your business money, sometimes it is your fault, You hired them for a reason, but perhaps you assume the staff would do exactly what we wanted them to do without us having been clear what that was. Unless it is theft of money which is a crime, there will be a combination of reasons to let a person go. How to avoid firing is part of KPI or Key Performance Indicators. Most staff will not care as much about the business as you do. You will learn, but expect mistakes by a process of checking references and teaching your employees.

At some point in your business, someone will not be happy with your product or service and will say so on social media. Be prepared. After you feel righteous and defensive, try to learn or listen to what the complaints are and find solutions. Do not take the complaints personally.

Many communications seem to have a desire to be instant, do not go into that trap. Take time with your correspondence. Wait a few hours before answering, find a space where you will not be distracted and do them there.

Try to work smart and find time to idle or enjoy yourself or have fun.

In your business, you will and want to do additional things, some of them will fail so the key is to simplify and stick with the things you have done or enjoy or are comfortable with. Do them.

Linking to dividend paying stocks, one of the ideas of dividend paying stocks is when you receive the income you have options what to do with it. You can enhance your lifestyle, you can buy more stock, you can do a variety of things which allows you to idle more or do the things you want to do because of the cash flow. Sometimes it takes a few years before you have the options, but having the options is what life is about. Even for the bohemians, cash flow is very important.

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

If you think about the USSR you likely think about communism, then the USSR was broken up and Russia became a capitalist society. It moved to one that is run by oligarchs, but it is still more capitalist than communist. Vladimir Putin became President and then President for life, and wanted to recreate the USSR again, one of the methods of doing so is to invade other countries. The closest one was the one on the eastern border – Ukraine. The President thought the war was going to be over in 2 weeks and he would do something else in the future. Ukraine fought back, the NATO countries sent arms as well as putting sanctions on Russia. A year later and Russia is still not winning the war, how does President Putin stay in power.

In an article by Anatoly Kurmanaev of the New York Times News Service, Putin has turned towards seemingly communism principles. Russia has immense stores of oil and gas or is an oil and gas economy, when prices rise the treasury benefits. Mr. Putin has poured the country’s sizable financial reserves into expanding military production and giving Russians higher pensions, increased government salaries as well as subsidizing mortgages.

The money has resulted in greater demands for everything, from beach holidays to tank chassis – all of which is fueling inflation. The central bank has raised rates more than expected.

As recently as 3 months ago, Western analysts expected the Russian economy to decline 0.9% according to a survey of 19 investment banks and other research institutions. In July, the projection has changed to 0.7% growth.

Lending has expanded rapidly since the invasion. Corporate loans increased 19% in the year to June according to Russian central bank’s figures.

The combined value of mortgages handed out by Russian’s top 20 banks rose 63% in the first 6 months, according to Dom RF and real estate firm Frank Media. In the first 3 months, one of every 2 new mortgages was subsidized by the state, through various social programs including loans to soldiers.

The impact of public speaking has been particularly pronounced in poorer regions on the periphery of the country that provide the bulk of military production and soldiers. Those soldiers are sending money back home and often the money they send home outstrips average local salaries.

The good news for Russia is because of sanctions, Russian cannot travel far so the money is going back into Russia. Hospitality spending is up 12% according to official reports.

The problem with any spending is that it is not sustainable. Russia’s oil and gas revenues are down and the country’s budget is in deficit. Russian government spending is up 50% according to Gaidar Economic Institute. Energy income is down 50% from the period with no sanctions.

Linking to dividend paying stocks, if a dividend paying stock is not generating a profit to pay the dividend, the dividend will be cut. If a country has less revenues and greater spending, eventually spending will be too much and outside investors will find alternatives. The internal investors try to hide their money for they know at some point the economy will collapse. When it will is a matter of time.

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

If you look at the companies that have paid dividends for years or generations and raise their dividends, one of the names will be Johnson & Johnson. The company is in the health care business, if you go into homes across the world, you will find one or more of their products. They make products to look after all parts of the body and they have very profitable brands, it is a company you can buy almost anytime and hold for years to come. Having said all those wonderful things about the company, the company has a legal problem.

In an article by Nicole Sperling of the New York Times News Service, for the 2nd time this year, a judge has ruled against J&J’s effort to use a bankruptcy case to limit its exposure to tens of thousands of lawsuits that claim its talcum power products caused cancer.

The plaintiffs claim that the company knew for decades about the risks linked to its talc products including baby powder. The company has switched talc to corn starch.

J&J created a company called LTL Management in 2021 to shield itself from talc ligation. It proposed LTL would file for bankruptcy and pay $8.9 billion to resolve all the claims against it.

Judge Michael Kaplan of the US Bankruptcy Court for the District of New Jersey dismissed the case because the lawsuits did not put J&J in imminent or immediate financial distress. Earlier the US Court of Appeals for the 3rd Circuit in Philadelphia dismissed the first bankruptcy effort for the same reason.

Erik Haas, J&J’s worldwide VP of Litigation said we respectfully disagree with the bankruptcy’s conclusion and will appeal the ruling.

The case will continue to overhang the company.

A long time holder of J&J stock is Jim Cramer’s Charitable Trust and he sold the holdings until the appeals are done. Lawsuits consume a great deal of time of senior management and they need to be focused on their great brands and other health care solutions.

Linking to dividend paying stocks, if the lawsuit of J&J is settled, the company can continue to do all the good things consumers have expected over the past 100 plus years. From an investor point of view, all companies will be sued at one point or another, there is a reason there are legal departments and some of the biggest law firms in the city where the company is headquartered are paid a retainer fee. The issue on law suits is how much does it consume senior management time? if you think it is too much, it is best to find an alternative till the situation changes.

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

We live in a country that long ago decided private investments are better than government investments, they maybe. However, the government’s role is support or infrastructure and private investment is to make money from the government investments. It is something most of us take for granted, but not every country operates in that fashion.

In an article by Joe McDonald of the Associated Press, in late July, the French Finance Minister said he pressed Chinese leaders to open their markets wider to foreign investment and encouraged China to invest in France’s electric car industry. France’s Finance Minister is Bruno Le Maire and he met with Vice-Premier He Lifeng.

Similar to other countries around the world, many manufacturing countries left their home base to operate from China. Now the same countries are faced with trade deficits and they would like the deficit to narrow. One method is to export more products to China.

China and France agreed to co-operate on climate change, financing for developing countries and nuclear power. One of France’s biggest exports is cosmetics and the countries agreed to a trade dispute mechanism.

One of the biggest electric vehicle (EV) is China’s BYD. Their cars sell in France and the country France wants BYD the world’s largest producer of EVs to produce them in France because BYD is selling the cars in Europe. CATL a battery supplier has set up a factory in Europe to supply BMW.

France has restrictions on foreign investments by chip producer Ommic because French counterespionage officials believe a Chinese investor who bought Ommic in 2018 was trying to transfer chip manufacturing technology to China. France wishes to protect its key technologies.

Linking to dividend paying stocks, one of the roles of government is to open doors of other countries, some countries are much more open about it than others. The government typically offers assistance to private companies and they expect the assistance in both good and bad economic cycles. In the US, we often see companies only wanting assistance in the bad economic cycles. The economic model is slightly different depending on the country, if the companies you have investment in operate outside the US, expect to see greater co-operation with the governments they operate in.

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

When we look back, we can see perfect information, how a beaten up stock or sector which has lost investor confidence regain its composure and the shares increased. We see with perfect information, if someone had invested in the stock or the group, they would have made relatively easy money. However, at the time the risk was very high, how do you buy low and sell high?

In an article by Emily Flitter of the New York Times News Service, a beaten sector was the regional banks. We all expect and want the bank you bank with to be stable and secure, and many were scared when Silicon Valley Bank went bankrupt. Many people moved their deposits as well as their share holdings to other banks. There was a practical reason, Silicon Valley Bank traded at $755 in November, 2021, it was trading around $500 when it needed capital. The 16th largest bank in the US had a mismatch of deposits to loans and was losing money. The bank catered to the software companies and the large funds pulled their money very quickly from the bank. If you owned shares in a regional bank, are you safe particularly when you see the share price fall by 50% plus. Would you buy more? What has changed?

The KBW Nasdaq Regional Banking Index, a proxy for regional banks after falling 35% is up 27% or those that kept their holdings are almost even. Those that took a risk and bought the index are up 20%. Alexander Yokum, an analyst with CFRA says the worries about the future of regional banks has evaporated in the second quarter.

What has changed? and how do you know it has changed?

The macroeconomic luck of the regional banks is the US did not go into a recession. Sometimes you need to be lucky.

The more practical reason the banks are stabilized is the growth of deposits. However, to lure the depositors back and attract new ones, regional banks offer higher interest rates on deposits. Some of the money came from money market deposits switching to the banks. Attracting deposits by paying higher interest rates means interest expenses grow, but many regionals are profitable. Watching the interest rates at the regional banks helps.

Another step was to get rid of unprofitable loans. This was the biggest focus of the banks to improve the quality of bank loans. Most regionals have cut back on less profitable products such as auto loans. (There are You Tube videos about how auto loans work and the people in the industry say there are fewer choices). The reason auto loans can be cut back is customers often deal with car sellers who arrange the buying and selling of cars which means the customers have less or no customer loyalty to the bank. Companies have to stay to fundamentals of their business.

Another approach was to avoid renewing loans to companies that did not use other bank services. Although no bank should go the way of Wells Fargo and 13 products per customer, even if you do not need them. If a customer has one product per bank, if the bank lost the business, they would not miss it too much. Many banks want 2 or 3 products to keep customers.

Another aspect of the improvement is if you hear because office workers are not going back to offices, then real estate developers has a problem with their cash flow, you might be worried. The regional banks have emphasized their exposure to office real estate is 2 to 4% of total outstanding loans. Most of the loans to office buildings in the big cities come from the large banks and alternative investments. Communication of the worst negatives is important and why not here.

JPMorgan Chase Jamie Dimon talks about fortress banking which means higher capital ratios than the regulators required is a normal way to do business. Regional banks have increased their capital ratios to cover surprise losses, while explaining they have gone through every portfolio we have in the bank. The banks report these ratios and analysts show them in their reports.

Linking to dividend paying stocks, many people own bank shares because they are profitable and pay dividends. When there is a crisis, it takes times and many aspects to go right to get through the crisis. If you watch from the sidelines and you need to understand what needs to go right and see if the signs are pointing to what the company is on the right track. Knowing the signs is part of your homework and then you have the ability to buy low and sell high with limited risk.

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