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.

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.