Everyone agrees stocks go up and down, what everyone does not agree is when a stock goes down when should you sell. When it goes up, the accepted wisdom is after you made the money you put in it, you should sell some and keep the rest. For some organizations they have a 5% rule of thumb, when a stock is greater than 5% of the fund’s holdings, the fund trims the stock holding. When stocks fall, people look for a reason till the reason does not exist anymore than they find other reasons why the stock should go up again. In the stock market the only true information is what has happened in the past, the future is any open to anyone’s prediction.

Last year the biggest stock name which fell in value was Tesla. There were many reasons for it, including Elon Musk bought Twitter and people did not like what he was doing with it. A more practical reason might be the other car companies are producing very good electric vehicles which means consumers have choices and Tesla is not the only choice in the marketplace. Should Telsa trade at the higher multiples than its peers?

In an article by David Randall of Reuters, the writer examines the 50 actively managed US equity funds which have more than 5% of their assets in Telsa stock. These funds were down an average of 42% last year.

The biggest fund in the $6 billion Baron Partners Retail fund with 52% of its assets in Tesla. The Zevenbergen Genea International Fund has 13% of its assets in Tesla. Both funds decreased by 43% and 59% respectively. Although with the Baron funds, Ron Baron has been a long-term Tesla investor which means most of his shares were bought very inexpensively, even though the price fell he is still up money.

According to Forbes, Mr. Musk net worth has fallen over $100 billion.

Telsa’s stock traded at low prices when it was issued, almost went bankrupt, then from 2018 to 2022 the stock was up 1,700% compared to the S&P 90% return. The stock trades at a premium to other vehicle makers and most of the sales and profits are in China, Jim Chanos of Chanos & Company asks is that good or will the multiple go down?

Linking to dividend paying stocks, ideally you are long-term investor, but all stocks go up and down and you should have a rule to follow when stocks go down, and when they go up. When they go up, that is wonderful and decisions are easier to make, but market discipline applies both up and down. With dividend paying stocks, you can worry more about the payment of dividends than the share price. Investing is complex, but you can make simple rules to follow that will allow you to consider alternatives.

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

The world has changed and most of us start the day, use in the day and often times finish the day using technology. For all companies which provide information, they eventually need to collect information which can be sold to advertisers. It is something we all know about, but as time goes by should we click on a box to share information, or can we be only seeking information and do not want the ads? One solution is provided by YouTube which offers a premium service without ads? If you are similar to most people, the answer is it depends? If you are a company, then you want a more automatic buy in by the user.

In article by Adam Satariano of the New York Times News Service, Meta suffered a major defeat after the European Union (EU) regulators found that it had illegally forced users to effectively accept personalize ads. Meta businesses include Facebook and Instagram.

The EU has fined Meta $558 million and has the potential to require Meta to make costly changes to its advertising business in the EU. The case hinges on how Meta receives legal permission from users to collect their data for personalized advertising. The company had argued when users sign on to Facebook, Instagram and WhatsApp they effectively give permission, or they do not have to use the service.

Meta has 3 months to figure out what to do in the EU which is home to 27 countries and 450 million people. The personalize ads helped Meta generate $118 billion in revenue in 2021. The ruling puts 5 to 7% of Meta’s overall advertising at risk. The other issue is many countries outside the EU will follow the example of the EU.

Linking to dividend paying stocks, all companies are ahead of government regulations for government regulations tend to be about delayed actions. A problem arises, the government investigates, proposes new solutions and then reviews them on a semiannually to yearly basis. The government is behind the industry, but it wants to cut back on the worst of the practices of the industry. It is not surprisingly for companies to be sued and that is why they have business to government roundtables where they can discuss issues and possible solutions. Sometimes public opinion moves one way or the other and governments have to react. The issue is does your investments try to do the right thing. No company is perfect but if they try, then governments will give them time to change. If not, the government should pressure the company to change.

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

About a year ago, Russia invaded Ukraine and the western countries were alarmed and have helped Ukraine by giving them weapons to fight back against Russia. The war still goes on, although no one really knows what Putin’s end game is, because if he thought he was going to get an easy victory it is not the case. After Russia invaded, the west imposed sanctions on Russia, but the toughest aspect was natural resources. Russia receives the majority of its budget from selling oil and gas and Europe was one of its biggest customers. Russian gas imports made up to 40% of Europe’s consumption. What to do when the war still goes on? In every industry there are alternatives, some are expensive, some have to be built, but there are alternatives if the government and industry have the determination.

In an article by Stanley Reed of the New York Times News Service, European natural gas prices have fallen below the level before Russia invaded. It was a market reality last summer gas prices soared as the pipeline from Russia was shut down for maintenance and an explosion damage.

The alternative Europe came up with was LNG or Liquefied Natural Gas from the US, Qatar and other sources. Europe rapidly built terminals to receive the gas sweeping away many bureaucratic obstacles and environmental objections. The plants include in Wilhemshaven in northwest Germany and Eemshaven in The Netherlands. The LNG plants allow alternative to Russian gas to arrive in Europe as well as demand for natural gas has fallen by 20%.

The good news for Europe is alternatives in place and the dependence on Russia has been broken. The not so good news is for the steel making and glass making companies, prices are still a little too high. For consumers, the prices will fall as the winter goes on, but all utilities have to ensure they have supply months in advance, so no price drop immediately.

Linking to dividend paying stocks, there are always alternatives, but there is reason why people tend not to use the alternatives – quality, price and list goes on. If something happens to the supply chain, governments and industry can find alternatives but it usually means the government must act through the incentive structure or give tax breaks or grants to industry to do the alternative. These measures work best because governments work with limited timelines in place for industry it is every quarter. What alternatives is your company looking at?

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

We all have many choices in our transportation needs, for the vehicle there are many loyal Ford or GM or other brand buyers because in the past the people were treated right or maybe badly or something by the other brand. When you fly you might be influenced by points or your company preferences or the one that made flying the least concern. Over the years companies build up a reputation and they are expected to do that on the busy days and the days which problems arise. For years, Southwest Airlines has built up a very loyal reputation and people want to fly with the airline. Then the weather happens.

In an article by Jake Bleiberg of the Associated Press, Southwest Airlines was hit the hardest by the weather in the week before Christmas. The airline was supposed to move over a million people, but things went from bad to worse with flight cancellations and lost luggage.

Federal regulators have vowed a rigorous review of what happened at Southwest, with all eyes on an outdated crew scheduling technology that left flight crews out of place after the storm hit, essentially shutting down almost all the carrier’s operations.

Southwest President Robert Jordan apologized and said the focus is reimbursing passengers and getting them reunited with their luggage. In the next quarter he will report on losses from the cancellations and refunds.

Linking to dividend paying stocks, all companies expect operations to run smoothly and need a set of defined operations when they do not. The mark of a good company is what do they do when something is not to the standard of their customers? For Southwest was always rated as one of the best airlines, it will be even tougher because they have to go above and beyond their normal. Will customers return as normal? will Southwest have to lower prices or give extra points or something that affects their profitability? will the competition match Southwest?

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

If you are evaluating a stock or want to learn Professor NYU Aswath Damodaran is a great place to start. In one of his videos, he would seemingly joke and ask people why you use the growth rate you used in the formula? the answer was China. For a number of years, people could get away with the answer because China and its manufacturing base was a prime determinate in the thinking process. Then COVID happened and China shut down.

In an article by Keith Bradsher of the New York Times News Service, the President of China Xi Jinping abandoned his stringent pandemic restrictions on New Year’s. Of all the countries in the world, China operated on the strictest standards and locked down cities to wipe out any traces of COVID. When a city was locked down, very little economic activity was allowed to happen and while the President says China’s economy has strong resilience, great potential and vitality, in many parts of China that is not reality.

In Guangzhou, streets are lined with shuttered stores and workshops. Roads that were routinely packed are now empty. Walls once plastered with help wanted signs are now business for sale.

One example is Tony Tang, the owner of a 5th floor workshop that makes woman’s clothing. Sales have plunged 2/3s in the past year with increased competition with small factories in China and overseas. The prices Mr. Tang can charge has fallen for a woman’s jacket $14 to 11.30 a piece. The workers are easily found, the issue is lack of orders.

The damage that zero COVID inflicted on China’s once unbeatable attractiveness as a manufacturing hub could be hard to repair. Some global retailers, seeking risk in overreliance on China have turned to other countries for supplies. It used to be almost everything in Walmart came from China, now Walmart expects to ramp up imports from India to $10 billion a year by 2027.

Linking to dividend paying stocks, all companies have supply chain concerns or logistics. Companies have a balancing act between storing supplies in their warehouses (cost money) or ordering just on time deliveries. There are advantages and disadvantages to both systems, but logistics is something to be concerned with when it does not work. Once it does not work all companies seek to find alternatives so the balance works. For your investments, how does the company manage its supply chain?

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

If you ever drive in rush hour, you will be in stop and go traffic. The effect of the traffic pace will be felt by all the cars on the road from the most expensive to the least expensive. One hopes the most expensive is a little more comfortable seating, but the pace of the traffic is the same. Sometimes the investment world is the same. Whether you are do it yourself investor or rely on outside help, it seems everyone achieved similar results.

Since the 1980’s when the stock market turned from primarily individuals to institutional driven, there has been a growth of numerous firms who hire the best and brightest to help manage or consult on the management of funds. The cream of the crop is sovereign funds or government pension funds. They have a duty to manage funds for the citizens of the land and in most funds, there is a provision to ensure some of the money is managed inhouse and some outside or use consultants. This can mean the funds have access to the sharpest talent to ensure the funds earn a good return for the citizens of the country. If a good consistent return is achieved, the politicians can increase benefits or offer one-time benefits that can help their reelection process.

In a report by Global SWF found that the value of assets managed by sovereign wealth funds fell to $10.6 trillion from $11.5 trillion, while those of public pension funds dropped to $20.8 trillion from $22.1 trillion.

Global SWF’s Diego Lopez said the main driver had been the simultaneous and significant 10% corrections suffered by major bond and stock markets, a combination that had not happened in 50 years.

Of the 455 state-owned investors, the fund which went down the most was Denmark’s ATP with a 45% plunge or the funds under administration fell $34 billion. (Perhaps new fund managers will be in place in 2023).

Linking to dividend paying stocks, while assets under administration fell, the report only says if the holdings were liquidated losses the amount would be lower. The reality is the funds are not being liquidated, for pension funds tend to be very long-term holders of their securities. Similarly, if you invested in a dividend paying company and the price went down, it is okay as long as the company is profitable and can pay their dividends. For example, earlier last year oil prices jump, oil stocks jumped and some prices are a little lower, however the cash flow has increased and expect large dividends to be paid in 2023.

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

In a commodity-based world, there are booms and busts as the price of the commodity goes up and down. When the busts happen, companies retrench and sell off assets. In the boom times, shareholders win as the company makes more profits than normal or what was expected. However, governments look at the companies and see excessive profits and sometimes they will make political hay over the connection to the mythical person on the street and the excessive profits. What is a company and industry to do?

In an article by Sabrina Valle of Reuters, the European Union is trying to tax the windfall profits of the oil companies. According to Exxon’s chief financial officer Kathryn Mikells, the tax would cost Exxon $2 billion through 2023.

Exxon spent $3 billion on its oil refineries in Europe and suggested it would have to cut back on future projects if the tax went through. Chevron echoed Exxon’s comments.

Linking to dividend paying stocks, often times politicians will pick on companies that boom and conveniently what happened during the bust of the commodity price. The companies and the lobby organizations do a good job at ensuring the views of the industry are well known. If there is big money evolved expect the large PR companies to get involved because while the companies may be able to pay something, paying the windfall is too much and when does windfall go away?

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

At country level, all countries sell bonds to pay for their infrastructure and carry on the normal business. People buy the bonds because the government has the ability to tax its citizens or raise money to pay the interest and principal. However not all countries are equal and that is reflected in the interest rates, bond holders demand for the use of their money.One of the countries that is not equal is Ukraine.

In an article by Andrew Kramer of the New York Times News Service, Ukraine has struggled to raise money on bond markets paying investors more than it is collecting, Ukraine’s is very dependent on foreign aid to pay the bills.

Every day, it seems Russia is sending drones into Ukraine and some of them hit infrastructure of energy and every day Ukraine fixes or attempts to fix the energy distribution channels for people to have power. Not surprisingly, the steel making mills and the agricultural sector have been damaged by the war.

Since Russia invaded on February 24, Ukraine has not been able to roll over its debt accumulated before the war. The country paid investors $2.2 billion more than it collected according to the Central Bank of Ukraine.

The Finance Ministry has sold $6.7 billion in bonds since the war started. The Central Bank has maintained a lending rate, averaging about 25% higher than the Ukraine bond yields, which have been around 15%.

Ukriane’s budget is expecting a $36 billion deficit. War is expensive as half as the budget is for the army, police and military outlays.

Why does the west prop up Ukraine, if it does not, prolong instability in Europe would be more costly according to Professor Tymofiy Mylovanov, a professor of economics at Kyiv School of Economics.

Linking to dividend paying stocks, personally you may want to support a company or a cause but from an investors point of view, you should stay away from some investments. One of the toughest decisions you will make it the new year is how to say no and protect your investments. There are many great causes to support, and you can do that with your dividend if you want to. From an investment point of view, you need a clear line when you say no to possible opportunities.

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

If you own a business eventually it will have a trademark or something that makes the firm stand out from another. It can be the marketing design, if you company is in the creative field it will have its own products. After inventing the product and before it needs to be sold, the product needs to be copyrighted, otherwise if the product has any success in the marketplace, it will be copied by another company somewhere in the world. To ensure that the company can stop the copying, the company will use lawyers who specialize in copyrights to sue and try to win penalties. Eventually copyright wears off or anyone can use the product to sell merchandise. In the world of pharmaceuticals, when the patent comes off over companies make generics which sell at lower prices.

In an article by Brooks Barnes of the New York Times News Service, one of the most creative companies in the world is Disney. Disney is a company which protects its copyrights, even though many of its characters means many things to its customers. Disney once forced a Florida daycare to remove an authorized Minnie Mouse mural. In 2006, it stopped a stone mason from carving Winnie the Pooh into a child’s gravestone.

The original Mickey Mouse or Steamboat Willie’s patent from 1928 is set to expire in 2023, how will Disney respond?

Disney holds trademarks on its characters and trademarks never expire as long as the companies keep submitting the proper paperwork. A copyright covers a specific creation, trademarks are design to protect against consumer confusion.

The Steamboat Willie character is not the soft cuddly character we all think of as Mickey Mouse, but Disney has been trying to incorporate the Steamboat Willie into the consumer’s minds as coming from Disney.

Linking to dividend paying stocks, all companies with patents and copyrights have to protect them, the issue is how much do they protect and to what extent can you. The reality is all successful products are copied somewhere in the world, the company makes a fake product and sells it and high margins, the company benefits the consumer misses out. Unless the company can fight it through education and lawyers – do you know or recognize a real and fake high fashion item? if you do not you can understand why large companies spend money on lawyers. How does your company protect itself?

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