If you like chocolate and many people do, however most of us really do not know about the raw material, we are only concerned with the finished product. The raw material of chocolate is grown on cocoa trees and in the world of commodity exchanges there is a price for cocoa. If you compare consumption in the growing country to that of Europe, you might wonder why is the number so low? could it change and why?

In an article by Geoffrey York of the Globe and Mail, the cocoa trees in the Ivory Coast country in Africa provide 40% of the global supply of cocoa beans to Europe and the US. However, in the Ivory Coast the consumption of the finished product in a chocolate bar is about 5 ounces versus 19 pounds in Europe.

To change the marketplace in the Ivory Coast. a chocolate manufacturer owned by Cemoi of France is making chocolate bars for the country beginning with the most basic bar which sells for 10 cents. The manager of the factory Lona Ouali, estimates cocoa producing countries are retaining about 6% of the $140 billion revenue that is generated by the global chocolate industries.

The country of Ivory Coast and Mr. Ouali would like to see more value added manufacturing in the country because similar to all crops around the country, farmers and those that pick the crops do not make the bulk of the money selling the harvest to consumers. However, much of the system and transportation networks are designed for the farmers to grow the crops sell to the manufacturers who change the cocoa bean to cocoa butter or cocoa cake and export it to Europe and the US.

Mr. Ouali says it is difficult to make chocolate bars because the sugar is more expensive than in Europe, milk has to be imported from France and factory exports are hampered by customs corruption or logistical nightmares. For example, it can take 2 months to ship to the next country over which is Gabon because there are no direct roads and shipping routes. The biggest African country is Nigeria however it has protection measures for cross border production.

Linking to dividend paying stocks, ideally you want to invest in a company further up the value chain because the transportation system is designed to move the goods from one place to another for processing. When the good is processed it can be shipped back at higher margins and earn the company profits which can pay dividends. It is good to understand the raw material, but examine the finished material companies.

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

All large firms talk to the competitors, and it is good to learn what they are thinking and possibly doing. The large firms such as Goldman Sachs call them at Talks at GS; Google has talks, Bloomberg has talks and you can see and listen to them on You Tube.

On one particular issue, Talks at GS interviewed Marc Rowan who is the CEO of Apollo Global Management. The interviewer was Allison Mass, Chairman of Investment Banking of Goldman who knew Mr. Rowan from working with him and very likely Apollo is a client of Goldman.

Apollo Global Management was $550 billion under assets. The company owns Athene Retirement Services which is the largest provider of annuities in the US and growing in Europe and Asia. Apollo makes its money on the spread of providing safe secure annuities at a lower rate and investing money to achieve a higher rate. Apollo Asset Management has $400 billion in credit investments using alternative securities; $75 billion in hybird and $75 billion in traditional private equity investments. Of the $400 billion, $200 billion is involved with Athene or they invest in themselves.

In 2008, the investment in Athene Retirement was $16 million and in 2023 worth $330 billion.

Mr. Rowan views the investment world through the phrase – excess return per unit of risk.

The largest area where they expect to grow is investment grade of alternative credit. Although Apollo was $400 billion, the market is worth trillions and they are not a major player yet.

Ms. Mass asked Mr. Rowan what he thinks about the future:

a) there is an inherent lack of liquidity in the markets – nothing is liquid when prices fall, they are liquid when prices rise.

b) Index and Correlations – Mr. Rowan believes in the publicly trade fixed income systems there is no longer seeking alpha because of the rise of Index Funds and people in general are buying the funds when they have cash and selling when they need it. They do not really know what they are buying, i.e. doing a fundamental analysis. For stocks, the main index is the S&P 500 and 5 stocks are driving the equity markets. If people are seeking alternatives, Apollo is in the business.

d) Technology is changing all financial services. If you examine all process of the financial services industry – there is fintech competitor. In the next 5 years, everything change, the seamlessness with change.

e) Apollo tries to think beyond the status quo, what could be or should be rather than what is. Their culture is a healthy intellectual subornation which means all people in the firm should be able to question the process before a decision is made.

f) does the company have momentum? If they have it, they will find a way around the obstacles. If they do not have momentum, everything is a barrier.

Linking to dividend paying stocks, as an investor you want the steady dividends and the long term capital gains which come from investing in profitable stocks. The issue is doe the stock stay profitable and why? Looking at momentum in the company and are they optimistic for the correct reasons help you determine an answer.

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

If you read Forbes or Fortune’s wealthiest people, you will notice there seems to be more of them than less. After billionaires have accumulated various monster homes or large homes, they tend to to have some they collect and then they look to owning a sports team. If you think about the era before radio and TV, sports teams were very inexpensive, now some are selling for billions of dollars. This tends to mean besides the expectation the price will rise in the future, by owning teams there are billions of dollars to be made. In addition, sports brings out people to watch and some of those the owner wishes to influence. Who does the owner invite to sit in the owners’ box?

In June, the big announcement regarding sports financing was a merger between the LIV Tour and the PGA Tour. The PGA is the older established league, there are tournaments every week but a few of them offer greater prestige and money for winning. Then the LIV was started with Saudi money and a very large bankroll of money. LIV offered golfers in the top 100 of the PGA, large signing bonuses to play along with more prize money than the PGA. The PGA reacted to LIV with a scorched earth policy, if a player signs with LIV, they could not play in the PGA championship tournaments. Then in June, the scorched earth policy was finished, and the 2 leagues merged together for the good of the game.

In an article by Tony Keller, he notes Adam Smith the economist and writer of In the Wealth of Nations, published in 1776, noted Prices in a monopoly are the highest which can be squeezed out of buyers, in a competitive market they are lowest which the sellers can commonly afford to take.

Monopoly’s benefit by never fully supplying the effectual demand. Keeping supply below demand also allows leagues to set a price for creating or moving teams, including taxpayer funded bidding wars among cities.

In the past, each time a new pro league was created to challenge a monopoly league, the competitor drove up athlete salaries. But those competing leagues were eventually all either crushed by the monopoly or merged with it for mutual benefit.

The history includes the AFL merger with the NFL; the WHA merged with the NHL, the ABA merged with the NBA and the American league baseball merged with the National League baseball.

Linking to dividend paying stocks, as an investor you like monopoly or monopoly like investments because they have the ability to raise prices and maintain market share. If you are customer you might have to pay more, hopefully your dividends cover the increase. In the corporate world there are always competitors and in every industry, people are trying to disrupt the industry one way or another, fortunately for monopoly like companies they have the abilities to buy out the competition and use the tools of the competition to build margins and maintain profits. If the investments you own are not doing mergers and acquisitions, it is time to seek alternatives.

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

Supply and demand is a wonderful explanation for commodity prices. For consumers we like to see as low price as possible, for producers they like to see as high price as the market can and will bear. For investors, as long as the price remains about the cost of production, the market will go up and down, but as there is stability in the market, all is good.

One of the easiest places to see supply and demand at work is the price of oil. During the global pandemic, the price of oil went down because people stayed home and demand fell. When countries opened up again, the price went up to record levels and has since fallen because demand in China has been relatively low as economic activity is not robust.

In an article by David McHugh of the Associated Press, the OPEC countries met in Vienna, Austria to determine countries production allocations. In addition to OPEC countries, Russia was included. Some countries such as Russia wanted no cuts in production, because they need the currency. While others such as Saudi Arabian agreed to a cut because they want a higher price. Saudi has large plans to diversify their economy away from oil and need $500 billion to build a new city called Neom.

Linking to dividend paying stocks, if you have investments in company that deal with commodity’s much will depend on the price of that commodity. If you own a major dividend paying company such as Exxon, the profits have increased with the higher price of oil and the company increased stock buybacks and special dividend payments to shareholders. Over the long term, shares in Exxon have done very well. The large producers want stability first, higher prices second which is a good thing for shareholders.

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

If you fly commercial planes, the likelihood you will be flying a passenger plane built by Boeing or Airbus is very high. The 2 companies dominate the industry and the 2 companies help generate one of the largest portion of export products for the US and France respectively. While other companies make planes, Boeing and Airbus dominate.

In an article by Tim Hepher, Aditi Shah, and Joanna Plucinska of Reuters, the biggest airline in India is going to order 500 more Airbus passenger planes. Indigo has a 56% market share in the world’s 3rd largest avaiation market. IndiGo has ordered from both Boeing and Airbus. IndiGo previously ordered 830 Airbus A320 and the new planes are narrow body A320. IndiGo is in discussions for 25 A330neo or Boeing 787 widebody jets.

IndiGo aims to double its capacity by the end of the decade and expand its international markets. The airline has a codeshare partnership with Turkish Airlines, American Airlines and KLM.

India and China each have a billion people and with more people becoming middle income, planes and the railroads are the choice of travel. China has spent billions on its infrastructure, India is the next country to spend on its infrastructure as people move about in the world.

Linking to dividend paying stocks, most countries want to be similar to the US with a heathy middle income group to support the consumer goods and service. Some countries have all the wealth at the top, but where the middle grows so do goods and services. We all grow up with ideas of what other countries are like and some change for the better and it is important if you own shares in global countries they have a presence in the changing countries. Do you know about the markets you investments do business in? If you are travelling during the summer, you can mix business and pleasure to see how countries are changing – either for the better or what you remember them as.

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

As an investor, one hopes to buy a stock as an investment and see its value grow as it does good work selling its products and services to customers which results in a profit and then can pay a dividend. There have been many stocks which have done this and this is why buying the S&P 500 index and holding it for a long period of time, typically will give you more wealth. As an individual investor what you are hoping for is the lottery ticket gains, but still to buying a lottery ticket they are hard to win the jackpot. In the past 20 years, 5 stocks have become worth a trillion dollars – Apple, Alphabet, Microsoft and Amazon, the latest is Nvidia.

In an article by Akash Sriram and Samritha A of Reuters, Nvidia has been on the radar of people ever since gaming has become more popular. The revenues from people playing games on line is equal or more than people who go to the theatre to watch movies. For those who play games, they might have bought game makers companies, the movie people likely bought movie companies and some bought the chips that power the computers. Nvidia’s graphic chips power the graphics to play games and during the crypto run up, Nvidia’s chips were powering the chips to allow the crypto industry to grow. Recently, ChaptGPT was launched to the public and Nvidia’s graphic chips were adapted to allow AI to do run the programs.

The AI capabilities needed by all companies has pushed up the share price of Nvidia by over 240% since October.

All Wall Street, there are multiple analysts that cover all the stocks, which means when Nvidia beat the estimates by more than 50%, the professionals on Wall Streeet were amazed by the performance of Nvidia and the stock rose over $100 the next day.

According to Refinitiv data, Nvidia’s forward price to earnings multiple is 47.79, which tops the sector median of 18.09. Is it overvalued? or are we in disruptive situation?

The computers which run AI are powered by chips called Graphics Processing Units (GPUs) which Nvidia has a 80% marketshare. All the other trillion dollar companies are large purchasers of the chips for their AI software.

Linking to dividend paying stocks, Nvidia pays a small dividend, but the growth has a high potential. They produce the chips that will run AI. Most of the time, by purchasing dividend paying stocks, you do not expect great growth, just consistent growth year over year which allows them to make profits to pay dividends. Once in a while, it is nice to have a growth stock in your portfolio.

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

Years ago, a small farm mutual insurance company wrote in its annual report, there was a rash of barn fires which meant the company had to pay out insurance and lost money for the year. The company was ensuring all its insurance holders with barns have preventable measures to lessen the risk of barn fires. The next year couple of years, there were fewer fires and the company paid a rebate back to policyholders. Insurance companies have a valuable role in the economy, but if they pay out too much, the company does not make money. If the company does not make money, they determine is the cause a one off or on going and what should be the risk assessment.

In a article by Christopher Flavelle, Jill Cowan and Ivan Penn of the New York Times News Service, climate change brings good and bad weather events to the US. However, when the bad weather event happens from an insurance company’s perspective, they will determine if they still want to be a provider in the market. Private companies have the right to choice who their clients are, companies owned by the government have little choice.

In California, the company with the largest market share in homeowner insurance – State Farm, announced it would stop selling coverage to homeowners. State Farm and other companies are trying of losing money to wildfires, floods and the negative effects of climate change.

The negative effects of climate change include storms and fires becoming bigger and lasting longer than in the past. The storms have always happened, but when the 100 storm becomes the normal or every 5 years, insurance companies both run for the exit and raise prices out of reach for the average mythical homeowner.

In most states, there is a desire not for the state government to be in the insurance business, but in Louisiana there are incentives for insurance companies to write policies. In Louisiana, the state’s Citizens Plan increased prices 63% to an average of $4,700 a year.

In coastal states, Congress created the National Flood Insurance Program in 1968, and as floods are more common, less private insurance companies are providing coverage. The intent of the program was to keep prices reasonably low and have averaged $888 a year. Under the new risk-based pricing the average price goes to $1,808. More and more private companies are leaving the business to the National Flood Insurance Program.

According to Jesse Keenan, a professor at Tulane University in New Orleans and an expert in climate adaptation and finance, it the past it has been possible for communities to pass on housing from generation to generation with no mortgages and no banks demanding insurance, which allowed them to go without insurance. However, as storms are more intense and do more damage, there is just not enough wealth to continue to rebuild, storm after storm.

Linking to dividend paying stocks, some of the companies that pay regular dividends are insurance companies. Most of us pay and hope never to collect, just the dividend payments are fine. Private companies have a right to pick their customers and it means not to do business with too much risk. Insurance is a risk business, and if the risks are too high or not enough profit, expect the insurance company to limit its business and focus on prevention.

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

Most people and companies try do the right thing and doing the right thing involves staying on the correct side of the laws. We all know countries have alignments and various political parties do things for their benefit but generally it is supposed to help the average mytical person. When Russia invaded Ukraine, even though the economy is a large one which means there are many areas of interdependence, there were sides to be taken. Europe and the US imposed sanctions on Russia, and the issue is how well is that doing?

In an article by David McHugh of the Associated Press, after sanctions were imposed on Russia, companies tried to unwind their holdings writing off billions of dollars worth of factories, energy holdings and investments.

A year later, it is clear, leaving Russia was not as simple as it was first announced. Increasing Russia is becoming the biggest hurdle. If a company want out, they have to require approval from President Putin which in reality can take years.

Many companies are simply staying put, because it is easier and everyone is hoping for a reason resolution to the invasion.

For consumers in Moscow, what they can buy has not changed much. Some of the companies names have changed but the products remain very similar.

Over 1,000 international companies have publicly said they are voluntarily curtailing Russian business beyond what is required by sanctions, according to a database at Yale University. However the Kremlin is adding more requirements plus an understanding that companies would sell at 50% discount. The buyers tend to be friends of Mr. Putin or well connected to his government.

Linking to dividend paying stocks, you like the company’s products and services are bought by a diversified country base which limits the potential of economy cycles on the sales. However, each country carries a potential risk and leaving can be difficult unless the country’s structures fall apart. When the economy’s structures remain, the market functions and it is difficult to leave because in this case the sanctions could be eventually lifted, then what? The decisions are often difficult to make but the company has to rely on its ethics and governance for guidance.

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

For decades, the world has seen China as one of the world’s top growth economies and there was much to celebrate. China has about 1 billion people, many were in the rural areas and the leadership of China has transformed the country from an agarin economy to urban economy first focusing on manufacturing and now services. In general, there has been a great uplifting of people from small rural plots to urban paychecks and correspondingly middle-income lifestyle. Part of the way China did this was to build infrastructure. From an engineering standpoint – the roads, the trains and the new cities are things to marvel at.

In an article by Daisuke Wakabayashi and Claire Fu of The New York Times News Service, the infrastructure included vast building of apartment towers. The Chinese government encouraged property developers, particularly large ones to develop vast apartment towers and office complexes. With the shutdowns from COVID, the government imposed, cracks in the economy are to be seen including the real estate market is overbuilt and vacancy rates are up.

China’s housing boom started in the late 1990s in the biggest cities and spread to smaller cities in the 2000s. In 2,000 China built about 2 million apartments a year, by the mid 2020s, the number was 7 million apartments a year. Real estate was accounting for 25% of China’s economy.

To stimulate the economy, China in the past encouraged real estate companies with easy credit, but this time many large property developers are saddled with debt, cities have empty dwellings and local government finances are down because of COVID funding. In China, people can buy their apartment and in the past, buying an apartment was a good investment, now prices are now because of oversupply or high vacancy rates. Although prices are up in Bejing and Shanghai, but away from the largest cities, the rebound is more muted or non-existent.

In one of the smaller cities, Nanchang has had building boom for decades and it has the same number of buildings over 60 stories as Beijing although Beijing’s population is 3 times larger. Beijing is the 2nd largest city measured by economic output, Nanchang is 36th, this translates to a vacancy rate of 40% in the office towers. In terms of apartment towers, many of the newer towers are not finished and empty because developers ran out of money.

In North America, overbuilding happens on a regular basis but there is absorption of space over the years, free rent incentives and a host of other programs before banks will lend to build more. In China, the economy depends on building more buildings which is a different scenario. In addition, in China the property developers are linked to state owned companies which provided low cost financing. Essentially the taxpayer was subsidizing the property developers, at some point someone has to pay the debts, who will?

Linking to dividend paying stocks, in the early 2000s, people were evaluating stocks and everyone said the reason why the stock would rise was China. The country was a powerhouse economy and by selling goods and services to China who would not win? The Chinese government can move people in and around China, but it is likely China will not be the growth country it once was for a few years. The decision to buy and sell a profitable stock will have to be based on its business plans and execution of the plan, not that some of its market is in China.

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