In every election at the state and federal level, the phrase our companies should do more research and development is spoken. It is spoken because companies and industries need to evolve, and one method is to spend money on research and development. For a company, there is desire, but research spending is similar to advertising, you know some of it works but some of the spending does not, but nobody ever knows which dollars do and do not work. It is often left to university research departments and the government to incentive research and development.

In an article by Sarita Chaganti Singh of Reuters, the government of India is planning a $2 billion incentive program for the green hydrogen industry. The money will be used to reduce the production cost and increasing the scale of the industry.

The government of India is following the United States and European Union which has approved incentives worth billions of dollars for green hydrogen projects. Hydrogen is made by splitting water with an electrical process and the fuel is free of greenhouse emissions.

Companies such as Reliance Industries, Indian Oil, NTPC, Adani Enterprises, JSW Energy and Acme Solar have big plans on green hydrogen. Adani is partnering with France’s Total Energies.

Linking to dividend paying stocks, government incentives tend to help large organizations stay large. In the example above the companies are some of the biggest in India with access to engineering consulting firms and capital to expand as the cost falls and margins are to be made from hydrogen. When governments offer incentives, the reality is the biggest companies benefit and they can keep making profits to pay dividends as they manage change.

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

One of the best investors over the years has been Warren Buffett and he is big fan of companies which have moats. One of the areas where the moats are biggest is in the utility division because all the pieces of generation of power need government regulation to do and government regulation to set prices. When the government regulates the electrical grid, it only allows one player to own the grid or a monopoly or for the greater good of the community. But what happens when something goes wrong? what if a government shut down the grid? what should other governments do?

In the case of Europe, before Russia invaded Ukraine, Russian gas flowed freely from the Siberian gas fields across Russia to the markets in Europe and Germany was receiving 40% of its gas from Russia. The pipelines connecting Russia and Europe are called Nord Stream 1 and II. On September 26, an underseas explosion happened in the Baltic Sea shutting down the pipeline, who did it and when will it be fixed?

In an article by Rebecca R Ruiz and Justin Scheck of the New York Times News Service, it turns out the explosion in the Baltic Sea was a very good place to hide who did it. Most of us believe pipeline companies have constant surveillance of their infrastructure, but according to Niklas Rossback, deputy research director of the Swedish Defense Research Agency, there was a lack of surveillance of the under portion of the pipeline.

The Baltic Sea is nearly an ideal crime scene, its floor is latticed with telecommunications cables and pipes that are not closely monitored. Ships come and go from the 9 countries bordering the sea and vessels can easily hide by turning off their tracking transponders. The Baltic is also a giant graveyard for unexploded munitions and chemical weapons dumped after the world wars.

Several countries including Russia have dive teams that specialize in the Baltic Sea. Russia has small, quiet submarines that can move undetected, according to former military and intelligence officers in the region.

The repair to fix the pipeline is estimated to be around $500 million. At the time of the blast of the pipeline which are concrete encased steel pipes nearly 4 feet in diameter and pipeline is over 700 miles long, the pipeline was not moving gas. This means some theories can be discounted, such as a bomb inside the pipeline, because it would need gas to move it to the target area. In all good mysteries there are many theories as to who did it and who benefits from the explosion.

Linking to dividend paying stocks, as an investor you like moats because there is big restriction to the competition. In all industries there is competition but in some, the competition seems to be years away. Understanding the competition is important part of your homework, but governments for a wide variety of reasons move slowly. If governments move slowly so do regulators who do the bidding of the government. Sometimes you will like the government, sometimes you want them to move aside, but governments can help you and ideally you want them on your side.

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

Have you ever been in a drugstore and seen a can with an older gentleman in a beard surrounded by a bee and the can is called Burt’s Bees. You or someone you know may use the product or products associated with Burt’s Bees. If you ever wondered what the story is with the company, the partial answer is on the website, but the full answer is in a book called Queen Bee written by Phyllis Austin published by Tilbury House Publishers, Thomaston, Maine, 2015. The book is the story of Roxanne Quimby, Burt’s Bees and Her Quest for a New National Park. The second aspect of the book is about Roxanne Quimby’s desire to have a new National Park in Maine.

Roxanne and her husband moved to Maine and were the stereotypical hippie back to the land people. That is a good thing, but life is difficult with a plot of land, little resources to buy in the market economy and few skills on farming, but people preserve, and it can be a wonderful life. Roxanne eventually worked with Burt’s Bees in beekeeping and candle making before transforming the company into a skin care company.

After Roxanne sold her company, she became wealthy, and she took her time about what to do next? As someone who lived a subsistence lifestyle for many years, wealth was good thing, and something can be done. Eventually she decided she would like to buy land to become a national park, which would help tourism. Roxanne was also influenced by Henry David Thoreau books including stories about Walden Pond which is located in Katahdin, Maine near the State Park.

In all states, the wonders of each state have provided economic activity and some large organizations tended to benefit. In the case of Maine, the state sold or leased tracts of land to private logging companies. The companies paid reasonably well to the millworkers, the belief was there an endless supply of trees for the mills to operate and the future was good. Given the relatively low population of the state, the other economic activity tends to be tourism from visiting for a week or two most often during the non-winter months. Most visitors as long as their piece of the woods is left untouched do not really think about the forestry industry and how it operates or operated.

A number of changes has happened to the forestry companies in Maine and elsewhere. The best or highest demand trees were long cut down and a new generation was growing. However, the world had changed from print to electronics and the demand for trees to become paper was diminished and continues downward. It used to be everyone read a newspaper or had one delivered to them, now people read on-line or the demand is simply not there and all the mills are not needed. Many were cutback and then shut down. If you go back in time, between 1880 and 1920, the Great Northern pulp and paper mill at Millinocket was the world’s largest pulp and paper mill and not far away was another large mill in East Millinocket. By 1970, Great Northern, International Paper, Georgia-Pacific, Oxford Paper, Fraser, SD Warren and Scott Paper owned nearly half of the state’s commercial forests. 25% of Maine’s manufacturing workers were employed in paper mills and paper companies accounted for nearly $3 of every $10 of Maine’s economy.

In 1982, there was a hostile takeover by Sir James Goldsmith of Diamond International Corp. Sir James sold off the mills but kept the land getting a return twice his investment. Once a paper company, Diamond International became a real estate holding company. The company looked at its forest to be developed for recreation, tourism and vacation homes.

Between 1994 and 2005, the share of the Maine woods owned by traditional forest companies fell from 59% to 16%. The new owners were interested in getting their money back in 10 to 15 years. They tended to cut forests faster which led to less forests which led to the state paying the companies not to cut and mills were closed and reopened in the southern US states.

Into the changing times, not understood by the regular person on the street steps in Roxanne to begin to buy land for a national park. In another time it was possible that Roxanne’s purchases and desire for a National Park would have been warmly welcomed but the setting and the new players in the state lumber industry were clearly not warmly receptive to Roxanne’s purchases. There were other individuals in the state who owned land such as John Malone who made billions in the cable TV industry and was the largest private owner of real estate in Maine, but he had other desires than Roxanne. He would lease his lands to the lumber company. Roxanne proved to be a savvy operator as she bought over 100,000 acres and would donate 87,000 to form a National Park in Maine, but the story is the journey.

Linking to dividend paying stocks, when an investor buys into the company they are buying into a proven and profitable company which over the years has been able to manage change. With multiple industries we see how new investors see the industry and sometimes it is not the same as the old players. There is a line between seeing opportunity and seeing terrifying change, receiving a dividend helps you to see the opportunity.

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

Have you ever been in a drugstore and seen a can with an older gentleman in a beard surrounded by a bee and the can is called Burt’s Bees. You or someone you know may use the product or products associated with Burt’s Bees. If you ever wondered what the story is with the company, the partial answer is on the website, but the full answer is in a book called Queen Bee written by Phyllis Austin published by Tilbury House Publishers, Thomaston, Maine, 2015. The book is the story of Roxanne Quimby, Burt’s Bees and Her Quest for a New National Park.

Roxanne Quimby grew up in various cities in the manufacturing belt of the US and spent summers with her Grandparents running an ice cream shop in Boston. In that setting, she learned the fundamentals of small business and customer service, which she would eventually take to her company. Well, before that she went to college and because she was taking art and it was the time of hippie generation, San Francisco was the place to be. She eventually passed and met her husband. They decided to live off the land, but where? Their journeys took them to Maine and buying a piece of land and living off the land. If you think about the people who settled the country, it was a hard life, but there were good things about it – being in the woods and the rhythm of nature. Ensuring your needs are met on a very limited budget. Roxanne and her husband lived there till her husband wanted to move to town and they separated.

Roxanne needing something to do, met Burt Shavitz who ran a bee colony. Burt was contented with the way of life he had created and really did not want to expand. Roxanne believed the honey and candles could sell more because they were very good. She did the craft fair circuit, depending on where you live will depend on the number of craft fairs in your part of the country, however for every product there are fairs or conventions. Customers do not tend to go to all of the fairs but some of the suppliers do and they get to know each other and learn from each other.

For those customers who did not attend all the craft fairs, Burt’s Bees produced a catalogue, Roxanne had a eye or flair for marketing and the catalogues are collector items or were very well done. They also helped to increase sales. Then Roxanne decided to go to the Wholesale market and premium stores which partly came out by going to conventions.

Once sales increase, all businesses must decide to you grow more or be contented with what you have. Roxanne wanted more and took increasingly control of the business. She moved into skin products and eventually there is a line of beauty products which exists today. There are many stories in the book as the company moved from small quarters to main street building in Guilford and then to North Carolina. Some were success, some were workovers but the product remained true to its roots as natural and people liked and bought it. Eventually the company was taking over by Clorex which still owns it.

What is important during the process of running the business, the product remained true to its roots 98% plus natural; no debt, Roxanne had a wonderful ability to link to customer needs, now days research does what Roxanne could do; the company used ingredients, integrity and unique packaging as its differentiation from others in the marketplace. When Roxanne hired people who previously worked in larger corporations, they found the ability to access reports was lacking in terms of pricing, profitability and raw materials. Moving from a small company to a larger one in skin care led to more government regulatory processes which the small company did not have.

The people Roxanne hired at the senior levels knew the company had something special and they were willing to bring their talents to help the company achieve greater production and sales, but often the company felt like a boot strap operation.

Linking to dividend paying stocks, in the retail world there are thousands of products and more are introduced on a regular basis most will not be a success from an investor point of view. They may be good products, they may be small or regional in nature, but often times the barrier to entry is low. Burt’s Bees largest customer in 2001 was health food store accounting for 40% of sales, then gift and specialty stores, and everything else – website, drug stores, etc. When you are shopping you are looking for the ones that are special. If you are not positive, wait till the giants such as Clorex buys the company and uses its distribution system to bring the products to all the markets. There is a good reason why companies that have billion-dollar line products are profitable on a year-to-year basis.

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

After WW II, Germany introduced a pension for people over 60, it was a good thing to do but in reality, the average age for life expectancy was 62. This means many people did not collect the money because they passed away. It has been over 75 years since the pension introduction and the good news is people typically live longer, many reach into their 90s. The ages for retirement crept up to 65 and upon reaching that age, the government sends you money. For a long time, the government money, plus a pension from work, plus your own savings allowed you to live reasonably comfortably. Times have changed, people live longer, and many people no longer have a pension at work. If people are living longer, do they have the resources to live a reasonable comfortable life? What should the government do?

In an article by Fatima Hussein of the Associated Press, the Biden government passed a $1.7 trillion spending bill to shore up retirement accounts of workers. The retirement savings measure labelled Secure 2.0 would reset how people enroll in retirement plans – you are automatically in and have to opt out if desired; if someone has student debt and many have – the student-loan payments can be a substitute for their contributions to the pension plan which means they can get matching employer contributions; the age for required distributions from plans increases from 72 to 75; and expands a tax-deductible saver’s credit.

According to Monique Morrissey, an economist at Economic Policy Institute in Washington, while the bill helps individuals, it also helps the companies which manage the funds or the financial services industry. Given that companies such as BlackRock Funds Services Group, Prudential Insurance, the Business Roundtable and American Council of Life Insurers help lobby for the bill, it stands to reason they will benefit from it.

The reality is according to the US Census in 2020, 58% of working-age baby boomers had a least one retirement account, 56% of Gen Xers and 7.7% of Gen Zers.

Linking to dividend paying stocks, macro trends are seen throughout the economy, and we know work has and is changing and governments are a lagging solution. They know the issue but there are vested interests on both sides, some who benefit from the existing structures that do not want change. It is the reason why it is easier to see in a smaller community of the plant which existed for generations slowly wind down and then it is shut. Everyone knew but it is hard till the final decision is made. When you are investing you can see the macro trends, but how does it translate on the ground? how are people making decisions? As we move into the New Year, pay attention but watch how people actually make decisions.

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

When 99% of people buy stocks, they hope the price goes up and stocks have two places to go – up or down. If you buy the index, you are expecting over time, the price goes up, this is the normal. The other method to invest is to hope the price goes down, but only after a great deal of homework is done. The bias for analysts in Wall Street is the price to go in the medium or long term. Once in a while, expecting the other result for stocks to go down is a successful investment. Last year if you were short the big tech companies, you would have made a great deal of money.

In an article by Carolina Mandl and David Randall of Reuters, according to data from S3 Partners, short sellers are sitting on $303.7 billion in realized and unrealized gains, a fourfold increase compared with 2018 the last profitable year. The returns for the short sellers have been a 31.2% increase.

The top winners for short sellers have been Tesla, Amazon, Meta, Apple and Carvana. The S&P 500 is down almost 19% and on tract for its biggest yearly percentage loss since 2008.

Linking to dividend paying stocks, note some of the results from above, selling short was profitable in 2022, but the last time it was profitable was 2018. That means for 4 years, you might have lost money. Although share prices have decreased, dividends have increased in many companies, which suggests being conservative allowed you a reasonable return on your investments. One example is the big oil companies – the stock price is up and dividends, special dividends and share buybacks are common. If you buy for the dividend, you can allow for the stock price to fluctuate and still be contented as an investor.

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

In every recession, cash is king because credit is reduced and has gone up in price or interest rates are higher than normal. Companies have the same concern as individuals, if cash is king, debt needs to be low or eliminated. If one of your investments has higher than expected debt, expect asset sales or changes in management strategic plans.

One company which has constantly made the news is Twitter and in an article from Reuters, Elon Musk said Twitter is on track to be roughly cash flow even next year.

Before Mr. Musk bought Twitter, the company was going to lose $3 billion, but with the cuts he has made the workplace now has 2,000 employees. Roughly 50% of the workers were let go.

Twitter was on track to spend $5 billion in 2023. In addition, with $12.5 billion in debt due to the acquisition, Twitter has faced a net cash outflow of $6.5 billion with revenue of $3 billion.

Mr, Musk said in a Twitter Spaces interview, his number one priority was to grow subscriber revenue. Twitter’s major advertiser will be watching closely as they have told Mr. Musk Twitter ads have the lowest return on investment out of all the social media platforms.

Linking to dividend paying stocks, sometimes debt is good, sometimes debt is not good and Wall Street analysts will penalize the company for having too much debt. Mr. Musk bought Twitter for many reasons but if the return on investment for the advertiser does not improve, they will move funds to other social media platforms. It used to be advertisers were loyal to the advertising venue or newspaper, but those days are long gone. If the revenue streams are not enhanced, Mr. Musk will wonder even more why he bought Twitter. For this kind of stock, it is better to watch from the sidelines than risk money.

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

If you were looking for something on the computer, the chances are you used google as a search engine, you were not alone for billions of people did the same thing – used google as a search engine. It is good, it is ad free, it works very well, once you get to the site where you are going the ads pop up and Google makes 80% of its revenues selling ads.

In all industries, in all products there is a competition and since 2000 we have become accustomed to one product or service that is called a disruptor or revolutionize an industry. For google search, there are many barriers to entry to scale up and the world likes google search.

In an article by Nico Grant and Cade Metz of the New York Times News Service, there is competitor, or it looks like there could be a competitor to google search. The competitor is Chatbot or ChatGPT.

Not that google has been caught flatfooted, google and many other companies, labs and researchers have helped build this technology. Chatbot is using artificial intelligence and can serve up information in clear, simple sentences rather than internet links. ChatGPT was released by a research lab called Open AI.

The language at ChatGPT os called LaMDA or Language Model for Dialogue Applications.

It is important to remember as successful as Google is, no company is invincible, all are vulnerable, says Margaret O’Mara, a professor at University of Washington. For companies that have become extraordinary successful doing one market defining thing, it is hard to have second act with something entirely different.

Google will be hosting a major conference in May about AI and how they will respond to the challenges.

Linking to dividend paying stocks, there is a reason why google has continued to be the number one search engine and it is partly the infrastructure they have developed and continue to develop, no one comes close. No one company makes all the right decisions, but with the talent within and available to google as well as the resources to throw at the problem, solutions can be found. Changing your search engine will not happen overnight, but if you change and see people around you are changing then it is safe to find new alternatives. In the meantime, understand the are search has many variables behind it and google leads the way, almost but not quite a monopoly.

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

In all industries, customers want choices, but in all industries the suppliers want the customers to buy the bulk of their goods and services from the supplier. That sounds simple, but suppliers often have relationships or direct ownerships or influence customers to be within their orbit of companies. If a company is not within the orbit, one measure of attempting to increase their sales is to use the government and its agencies to allow more choice.

It is easier to see the tighter orbits with software companies because they can and do offer fewer choices.

In an article by Kelvin Chan and Haleluya Hadero of the Associated Press, Amazon has agreed to change some of its practice in Europe.

In Europe, the governing body is called the European Union and the EU has an antitrust regulator and it tries to ensure choice is offered in Europe. The EU could have potentially fined Amazon with fines worth up to 10% of annual worldwide revenue.

Amazon agreed to a 7-year agreement beginning in June of 2023. The company promised to give products from rival sellers equal visibility in the “buy box”, a premium piece of website real estate that leads to higher sales. European customers will get a second buy box underneath the first box but with a different price or delivery offer.

Amazon is also easing access for merchants and couriers to its Prime membership service. At present, couriers can only deliver Prime parcels if they are approved by Amazon. The change will allow access to more couriers.

Amazon will stop using non-public data from independent sellers on its platform to provide insights on how to compete against those merchants through its own sales of branded goods or private label products.

John E Lopatka, an antitrust scholar and law professor at Penn State University, said the changes happening in Europe could become a precedent for US antitrust regulators.

It is not unusual for companies to be sued for antitrust practices; the competition always thinks the company is doing a monopoly like practices. As investors, you like that, as a consumer may not. Companies that can operate in a monopoly or monopoly like practice can raise prices and remain profitable to pay dividends. If you own them, being an owner is a good thing.

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