Over the past 40 years, Russian has invested billions of dollars to move Russian oil from the north including Siberia to Europe. The pipelines moves the oil and gas and Europe has been a steady and growing consumer. The pipelines include the refinery which makes breaks the oil to something a consumer to use. When Russia invaded Ukraine, the west imposed sanctions and as the sanctions lasted from weeks to months, Russia flexed its muscles to cut back the oil and gas going though the pipelines to the refineries. It might have been maintenance issues, because all pipelines need regular maintenance, but the time frame was becoming too long. What should Europe do?

In an article by Claudia Scholz, the German government decided to take control of 3 Russian refineries located in Germany. It is ironic, in a capitalist country has decided to nationalize a communist country’s assets. The most important refinery is the PCK refinery in Schwedt. The other refineries are the Rosneft Deutschland and the RN Refining and Marketing.

The refineries will be run by the Federal Network Agency and itself of Russian oil and gas, Germany will import oil from Poland, the US, Libya and any other oil and gas producer. Because of the sanctions, Poland did not want to deliver oil to a Russian-owned refinery.

Russian state oil company Rosneft has accused the German government of a forced expropriation of its German subsidiaries. The company spoke of an illegal seizure of assets and announced that it would take legal action to protect its assets. (This is what the US government said about Cuba seizing assets and the issue is still in the courts).

Linking to dividend paying stocks, all companies with assets in foreign countries face the prospect of higher taxes, etc when governments change from pro-business to pro nonbusiness. The language is designed to protect the assets or receive adequate compensation if something happens. The term rule of law has to do receiving a fair value on the assets. For your investments, how much of gross income is received from outside the US and do governments abide by the rule of law?

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

In every credit cycle when interest rates rise and inflation or recession is heard to be coming, the major banks make plans for greater loan losses. If the number is low, the bank makes bigger profits, if the number is high, the bank makes less profit. Given that every economy moves on ease of credit, the banks will determine which companies to slow credit to, similar to most industries the small and medium sized companies tend to see it first. It is why, politicians will say the system needs to change, but it rarely does because someone has to guarantee the credit. Usually, the large organizations are the last to have credit cut but it does happen.

In an article by Eric Onstad, Patima Desai and Peter Hobson of Reuters, the largest bank in the US JPMorgan Chase has reduced lending to China’s Tsingshan, one of the world’s largest nickel producers.

JPMorgan Chase is one of the biggest banks in the metals industry which tends to mean they should have better information than anyone in the business and when they cut back, it sends a signal which is not good. Not surprisingly there were few comments from JPMorgan. JPMorgan has cut credit or serve notice they will cut credit by the end of the year to several customers in Asia and Europe, besides Tsingshan.

In March, Tsinghan Holding Group was at the center of a crisis at the London Metals Exchange when Tsinghan was speculating prices would drop, however nickel prices doubled in a matter of hours. The LME halted trading and did the unusual step of cancelling billions of dollars in deals thus saving the industry. The action threatened to push some banks and brokers into default and JPMorgan took a $120 million loss provision.

Linking to dividend paying stocks, all commodities trade on exchanges and normally the markets are regulated, and everyone can see the information if desired. If you own investments in the commodity business, it is good to know how the commodity is traded and where it is traded. For all commodities there are the users and speculators in the market and the market needs both, however if one group gets ahead of itself, the other suffers for there is usually a balance. For your investments, you need to know where the company makes money and if the price of the commodity is higher, than you need to do little but wait for the profits to translate into dividends. When the price falls below you need to find alternatives till the commodity price moves above.

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

In the past 10 years we have been living in a low interest environment and when interest rates were near zero, the alternative was to be invested in dividend paying stocks with dividends at 3% and above. Along with a rising stock market, the total returns were healthy. Economies move in cycles and the rise in inflation means there is a reasonable alternative to investing in the stock market or bank savings and bonds and interest rates on savings will rise.

In an article from Reuters, Ray Dalio, founder of one of the world’s largest hedge funds called Bridgewater Associates is predicting if the US Federal Reserve raises interest rates aggressively to tame inflation the stock market will fall as people move money into bond type investments. Mr. Dalio has some YouTube videos on how the market moves into cycles and where in the cycle we are at (the videos are worth viewing). Mr. Dalio said if the fed rate goes to 4.5%, this will lead to a decline in the stock market by 20% as money seeks alternatives in bonds.

Linking to dividend paying stocks, each investor at some point will examine if you can make X% with no risk, why invest in the stock market to make the same risk? In every cycle of the economy there are alternatives, some are better than others. The risk return is different for everyone because what risk are you comfortable with on your money? The answer tends leads to a focus on growth stocks or value stocks and combinations in between. We know that over the long-term investing in the stock market index (where the losers are changed to winners every 6 months) means the stock market will outperform other alternatives. We also know, if a company is profitable its shares will go up and down, but the dividend tends to go up over the years, which makes the total return a good number. In the stock market the only perfect information is looking backwards, as investors you need to look forward and from your homework made a decision.

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

Every disagreement has both known and easily seen reasons and some underlying which are simmer below the surface. Often times we heard about the easily seen reasons because they are the easy fruit to harvest. The issues under the surface are harder to negotiate because they tend to be feelings that people have – some based on facts, some based on myths but feelings nevertheless which need to be dealt with.

In an article by Lisa Baertlein of Reuters, the unions and the railways were set to strike in mid-September and that would not be good for the economy. Railways move freight and the government is worried the economy could go into recession and they have elections in November. The government mediated an agreement with the unions which includes a higher pay raise. Often times while a pay raise is front and center, the issues of attendance, sick time and scheduling are the underlying issues which workers deal with daily. With many tech advances, these issues are tracked closely, and people can feel the company is working against them rather than with them.

The agreement with the railways involved 115,000 workers and 12 unions which all have to have votes to agree to the terms of the government and railways. In most combinations there are some unions which have an easier sell than others, just because of what members want or how they perceived how they are treated. There will be some who saw railways continuing to make profits, pay dividends and very little went to the workers.

Linking to dividend paying stocks, the railways when they are operating are similar to utility stocks which tend to be highly regulated and there is competition, but not necessarily between other railroads. The competition is between trucks and ships and the movement of goods, not necessarily between 2 railroads. This important movement of goods allows the railways to earn profits to pay dividends and shareholders are reasonably satisfied.

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

In private life most people need a lawyer for important events such as buying or selling a home, but for the most part the average person does not need to have a law firm on retainer. In business, there are many contracts and lawsuits, hopefully the lawsuits are minimal, but having a law firm on retainer and legal advice is part of the normal operating business procedures. Companies are sued for a variety of reasons and companies always want to have the conclusion as a one off or somebody in the lower level went over the established line the company operates in. Sometimes the fine is less than typical normal operating procedures and the company will continue to operate be fined and continue to operate because the reward is great.

In an article by Foo Yun Chee of Reuters, the most important search engine is Google and being the most important in the world, how the company ranks its ratings is carefully viewed by competition bureaus around the world. Given Google makes 81% of its income from advertising, particularly from companies who want to be highly ranked in the search outcome, in Europe the top European court fined Google and fined the company $5.38 billion because Google broke competition rules.

Over the past decade, Google has been fined $10.84 billion in 3 investigations. Google has the right to appeal the decision, and likely will. The case is T-604/18 Google vs European Commission and the case involves the restrictions Google imposed on manufacturers of Android mobile phones for Google owns Android operating system.

Linking to dividend paying stocks, given all large companies have lawyers and use outside law firms to handle various cases, you might want to know what lawsuits are pending and has the company put enough money in reserve to pay for them or what the expectation will be. Lawsuits are normal operating aspects for companies, not so much for individuals, but for companies as long as the expected costs are either in reserve or could easily be paid by profits, you have less to be concerned about.

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

When COVID happened, all over the world governments sought to ensure few people died by shutting down workplaces to ensure people did not gather as much. It was a blow to many economies and with some vaccines available, people were able to gather again. Given entertainment and hospitality industries need people to gather to operate it was a very good thing to reopen again. People had some choice and soon job openings were seen, companies need bodies to carry out their business. Where were the people?

In an article by Lydia Depillis of the New York Times News Service, some of the missing have been found. After World War II, the servicemen caught back from the war and started having babies, this lead to the great baby boom from 1948 to 1965. After 1965, families became smaller from an average of 5 plus to today’s 1.5. The statistic meant a wave of people moved into school systems which had to be expanded, then they moved in work and now the wave is in the retirement range. There are many people who can retire, although the magic age is 65 when the government gives you full pension for being alive.

According to JPMorgan, some of the gap is owing to COVID’s death toll of more than 1 million people including 200,000 of retirement age. In addition, legal immigration is down by 3.2 million people. People looking for work is 62.4% compared with 63.4% in February of 2020.

In terms of the baby boom group, people who had been staying in the work place longer because we are living longer before the pandemic are disproportionate dropping out and have not returned. When asset prices including stock market values and housing prices increased, those that were fortunate to own assets did some calculations and retirement was easier.

Linking to dividend paying stocks, we all buy stocks to increase your net worth and everyone has a different point in which they could or would retire. Some wait till the government checks to ensure a steady cash flow, some wait till their assets are a level they could sell and be ok. There is no number otherwise, those that are multi millionaires or billionaires would not work. What is your expenses? type of lifestyle you wish? life choices? health? and the list can and does continue. With dividend paying stocks, the number is closer every year.

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

If you believe in the Mediterranean diet for healthy eating, it likely includes using olive oil. Similar to products all over the world where the best olive oil comes from is up for debate. You may have thought about Italy or Greece, but half of the world’s olive oil production comes from Spain. In Spain, the 67 million olive trees planted in the province of Jaen, located south of Madrid and north of Granada has been growing trees since Spain was part of the Roman empire. The trees of Jaen is one of the world’s largest man-made forest and has made Jaen the olive oil capital of the world.

In an article by David Segal and Jose Bautista of the New York Times News Service, the reason why the region is in the news is the drought that has been going on in Europe. The trees are green but the production of oil will be down drastically, about 1/5 of normal volumes. It is hard to be a farmer and pay bills on 20% normal volume. The millions of trees has essentially made the province of Jaen a one crop economy.

In years gone by, harvesting the olives was a very labor intensive industry, but a now days tractors equipped with a vibradora, a machine which shakes the trees and the olives fall into a net.

In Jaen, it has not rained in 3 months which means those trees which have some irrigation are alive and doing well, those without the leaves are turning brown with little to no fruit. Olive oil trees are use to living without much water, but the winters are dry and short and the droughts are stronger and lasting longer.

The drought has increased the price of oil oil, but costs to produce the olives has increased. The average farm is about 4 acres and the government does provide a subsidy of about $1,400 a year.

Linking to dividend paying stocks, similar to all investors have diversification in your portfolio is a good thing. It is difficult, for example in the above example, trees have producing fruit for thousands of year we are in 2022, Roman times are year 1. Under normal circumstances the farmers could produce and make a reasonable living, however capital costs are going up and farms will need to consolidate or change because of climate change. Change is difficult no matter what industry you are in.

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

Debt is a wonderful dual sword – debt is needed to allow growth, but debt has to be paid back. Every company and individual needs to pay attention to debt, but for companies sometimes the government gives the impression, the encouragement to grow even faster and the government will be pay the debt. The scenario has happened in many cases and the latest one is Evergrande Group.

In the 1980’s up until the mid 2000’s, China was leading the world in growth rates and not surprisingly the property companies were putting up apartments and houses faster than people could occupy them. In China there are cities for over 100,000 people but less than 5,000 live in it or Ghost Cities. Someone authorized and gave the distinct impression it was important to build them. One of the big property companies was Evergrande Group.

According to an article in Reuters, Evergrande Group has over $300 billion in liabilities. The company has been trying to sell its headquarters building in Hong Kong for $1.7 billion to raise funds. The Hong Kong tower is pledged for a loan by lenders led by China Citic Bank a subsidiary of the Chinese state owned bank China Citic Bank Corp Ltd. The bank is appointing a receiver in bankruptcy to seize the 26 story office tower.

Linking to dividend paying stocks, when debt is very inexpensive it is good companies are using debt to grow the business, but interest rates go up and debt needs to be paid first. For your investments, watch the debt levels.

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

If you think about the movie industry, new films are released and many people around the world go to movies. If you think about the gaming industry, the industry is larger than the movie industry.

In an article by Mathieu Rosemain and Tassilo Hummel of Reuters, Chinese tech giant Tencent is increasing its minority stake in Ubisoft. The deal values Ubisoft at $13 billion.

Ubisoft’s most popular games are Assassin’s Creed and Tom Clancy’s video game franchises.

Tencent’s investment in Guillemot Brothers Ltd. which owns the bulk of the family’s 15% stake in Ubisoft. Tencent has the right to increase its stake from 9.99% from 4.5%. There will be a tie up for 5 years, if Tencent wishes to sell, the Guillemont family to buy the shares.

Linking to dividend paying stocks, it is not surprising large companies continue to grow because they have the ability to partner with other profitable companies and hopefully can offer customers a good reason to stay within their orbits. At some point in time, to play Ubisoft games in China will mean some link to Tencent and the profits will stay within their orbit.

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