If you think about the country with the greatest number of people, often times you would think about China, but a new country has arisen – India. The country of India is complex, it is also one of the fastest growing economies in the world, with growth rates expected to increase 6%.

In an article by Alex Travelli of the New York Times News Service, India’s economy is booming, the stock markets is one of the best performing exchanges and similar to China, its infrastructure is changing fast. There is a hitch, investments by the private sector or companies is stagnant.

The goal of Prime Minister Modi is to catch up to China by 2047 and there is a shift in manufacturing from China to India. In addition, if you listen to politicians around the globe, they want to be dependent on China which allows India to step into a big gap.

The World Bank has applauded India’s commitment to infrastructure spending, but it is important after the port is made new, a new industrial park lures companies into building plants and hiring workers.

The stock market In Mumbai are worth nearly $4 trillion up from $3 trillion in 2022.

Foreign investment which averaged $40 billion has shrunk to $13 billion in the past year. One of the reasons is businesses are waiting and seeing what the government will do. Prime Minister Modi’s government is interventionist and sometimes he is correct and sometimes not so good. For example in August, the government announced sudden restrictions on laptop computers. That sent businesses which depend on them in a tailspin and the measure was withdrawn.

If the business is close to the Prime Minister, then regulatory measures seem to help them more often and the 2 biggest examples are the Reliance Industries and the Adani Group.

A factor in holding back the Indian economy is wealth distribution. In a population of 1.4 billion, 20 million are doing very well and consume products, buy homes and autos. Most of the rest of the sector is struggling with food and fuel prices or the lack of robust middle-income group.

The biggest wildcard is whether India can grab a significant share of global business from China. For example Apple is producing iPhone has a 5% market share. Apple builds about 7% of the world’s iPhone’s in India but want to increase that to 25% by 2025.

Linking to dividend paying stocks, companies and countries around the world have tried to gain growth over the expectations for generations. Sometimes it succeeds and sometimes it does not and only government spending is left. It is important as an investor to ensure the fundamentals are in your favor.

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

If you want to buy a new or used vehicle, you will likely be looking at GM, Ford, Chrysler, Tesla, Toyota and Honda, they dominate the market and most of us have one or more of their vehicles. However, the second biggest world’s economy is China and all those automakers are in China, but a different name leads the sales number.

In an article by Claire Fu and Rich Barbieri of the New York Times News Service. Chinese corporate giant BYD sold 3 million battery-powered cars. The total was made up of 1.6 million fully electric and another 1.4 million hybrids. BYD made $1.5 billion in the first half of last year.

According to the Chinese Association of Automobile Manufacturers, Chinese automakers sold 9.4 million electric vehicles and hybrids up from 6.9 million in 2022. In 2024, the expectation is 11.5 million.

China rules the supply chain for battery powered cars – from the mining and processing of cobalt and other materials used in batteries, to the deployment of robots that make the vehicles. In total 1.5 million people are employed in the manufacturing process.

One of the reasons China is in the lead for adoption of electric vehicles is government support.

Tesla has a large presence in China and is expected to sell 1.8 million cars worldwide. During the year. Tesla lost some market share to rivals as they introduced new electric vehicles.

BYD is large in the US, but rarely sells in the US because of high protection tariffs. To sell more cars, they are targeting Europe by building a factory in Hungary.

BMW is investing $1.4 billion in a battery plant in Shenyang.

VW which counts China as its biggest sales market, is moving more of its supply chain and manufacturing to China.

Linking to dividend paying stocks, most of us buy branded items and we think they are better. Sometimes the answer is not that simple. it could be high tariffs help direct us to lower tariff items. Government policies can help and hurt companies you invest in, do you know what the tariffs are for the companies you invest in?

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

If you had the job as a central banker to manage your country’s currency, you would love to have moderate markets. The economy has growth in it and while there are small fluctuations, the world sees your economy as good. However, the world and countries go in cycles and sometimes there are downturns, what should the central bankers do?

In an article from Reuters, it used to easy to be a central banker in China, growth was a given and the perception was China’s economy was the 2nd largest in the world and could offer an alternative to the world’s largest the US. Then COVID happened which included shutdowns, governments around the world wanted changes to manufacturing basis, the economy slowed and housing prices did not rise and began to fall. The prices of housing continue to fall and while the government has improved infrastructure greatly, most of it does not bring in revenues. What can Central Bank do?

Central Bankers only want the currency to float to markets when there is growth, when there is limited growth or no growth, the first idea is to use reserves to shore up the currency. In 2015, the bankers used that strategy to spend $1 trillion in reserves. In 2023, a different strategy was used. The central bank or People’s Bank of China (PBOC) defended the currency by signaling to markets what kind of selling it would and would not tolerate.

As the currency for the world’s 2nd largest economy and biggest exporter, the yuan’s value determines the price of goods around the world and trillions of dollars in capital flows. it also serves as a barometer of China’s challenges.

10 traders interviewed by Reuters said key warnings first emerged in June when the PBOC daily yuan guidance that determines the trading range, known as the midpoint, started to diverge from market expectations. In theory, the midpoint is based on contributions from 14 banks and referenced to the previous day’s trade and overnight moves, it should be easy for markets to predict the future.

In August, what traders saw the PBOC was signaling that it did not want the currency to go where the markets were pushing it. The PBOC encouraged state banks to be buyers of the yuan. This has worked and volatility has been contained.

The China FX Market Self-Regulatory Framework which is overseen by the PBOC told major state-owned banks to cut the dollar deposit rates, which would encourage deposit holders to switch from dollars to high deposit rates in the yuan. In addition, all state banks have customers which export and often times there is a need for dollars to pay the bills. In the past, the surveys had been done monthly, recently the needs of the large dollar exporter is monitored weekly.

For now the price of the yuan is stabilized, but the largest exporters pay attention to dollar payments.

Linking to dividend paying stocks, companies which have operations in multi countries have the benefit of diversification, but they also have currency risks. Most of the time, it is a low risk and is easily managed. Once in while currencies are a risk, do you know what the risk is for your investments?

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

There is a sports theme Tom Cruise movie with Cuba Gooding, and the Tom Cruise character is trying to secure the Cuba Gooding’s character representation as a sports agent. Cuba says say Show Me the Money, and Tom Cruise says it. Cuba says louder and eventually Tom shouts it in the office. Show me the money and people will follow the path.

Every year highly capable people who have served in the armed forces retire and the retire with a number of skill sets. The military has an age limit to retire which means people still want to do something. In the past, if you examined the Vice Presidents at a company which supplies services and goods to the military, the resume of the Vice Presidents often included past military service. This was the accepted route and many followed it. but lately there was been a new path to follow.

In an article by Eric Lipton of New York Times News Service, the new path to follow is venture capital firms. The pay could be twice as much, if the pentagon buys the equipment being offered the company could go public and you would have low-cost stock or carried interest and the job includes mingling with the decision makers on a regular basis.

The difference is similar to most industries in the world, the military suppliers are changing, yes there is still the large equipment makers such as Lockheed Martin and Boeing, but drones are playing a larger role in wars around the globe. Drones are dependent on software or technology or often smaller companies. With drones there are both offensive and defensive strategies and both are needed.

In the past 4 years, at least $125 billion of venture capital has flooded into startups that build defence technology, according to data assembled for the Times by PitchBook which tracks these investments. The prior 4 years $43 billion flowed into startups with defence technology.

One of the many forms the new lobbyists were found was the Annual Reagan National Defence Forum at the Ronald Regan Presidential Library. Similar to every other type of convention, people were mingling and talking about potential deals to be made.

The difference between moving into venture capital and moving into large military companies is speed for the deal to close. The Defence Department typically moves slowly. A venture capitalist places money in a startup expecting to see revenues moving to $50 million or $100 million a year. It does not happen often. The venture capitalists are talking to members of Congress, members of the military to help move along solutions to problems facing the military. Sometimes it works.

Linking to dividend paying stocks, in every industry there are attempts to bring technology to disrupt the processes or to make it better, in the eyes of those promoting technology. Large organizations take their time to pick which one works best for them. New is wonderful, but does it create higher margins? Whatever industry you invest in, they all have a similar structure, they all have conferences which the decision makers go to and conferences which information is shared. It is not surprising people move back and forth between government and industry, it is a long accepted practice and good for many careers.

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

In the world of individual investing, the goal is to achieve an income, live off less than you make, accumulate savings, invest it and then through the magic of compound interest it accumulates over time to achieve another stream of income. The good news is the process happens on a regular basis, what there tends to be is once you have accumulated an amount how do you protect the number one rule – try not to lose money.

In an article by Claire Fu and Daisuke Wakabayashi of The New York Times News Service, one of China’s largest investment firms, Citic Trust, had a very clear message to investors, when it was aiming to raise $1.7 billion to fund property development in 2020; there is no safer Chinese investment than real estate.

Citic Trust is the investment arm of the state-owned financial conglomerate Citic, called housing China’s economic ballast and an indispensable value investment. Citic Trust was partnering with Sunac China Holdings, a large developer.

3 years later, investors have recouped only a small fraction of their investments. 3 out of the 4 fund’s construction projects are on hold or delayed because of financing problems or poor sales or both. Sunac has defaulted and is trying to restructure its debts.

The back story is over 25% of China’s economy was based on property investments or the rising housing price. What started as a housing slump has escalated through a full-blown crisis. The budgets of local governments, which depended on revenue from higher real estate prices have been destabilized. All the ties that once ejected growth are now deepening the downturn as problems spread across the economy.

3 years ago no one would have dreamed of the degree of defaulting, now more than 50 companies have defaulted on their debts and are in the process of restructuring.

Trust firms such as Citic are arms of China’s so called shadow banking system that sells investments to companies and wealthy individuals. They face few regulations and manage over $3 trillion in assets.

Property developers relied on trust firms to extend loans and invest in businesses that regulators considered too risky for traditional banks. The banks turned the loans into investment projects that were sold to Chinese companies and wealthy individuals promising lucrative returns.

The market was booming when Citic Trust established the Junkun Equity Fund and the idea was Sunac would develop the projects and then sell then. Investors would get their money back as well as a portion of the profit after 3 years. The expected return was double digits.

One investor in the article, invested her life savings of $420,000, because Citic is a big brand with a good reputation. The manager all but assured her she would receive her principal back plus interest of a minimum 7.5%. Since then, she has received $80,000 in payouts, the rest is unknown. Citic says the entire market is now good now.

Linking to dividend paying stocks, once you have accumulated money, you will look at a variety of options. There will be companies offering you higher returns than normal and you will be tempted. In the case above, because it was a big brand, likely the lady received more than if it was not a big brand, but in reality, she has lost money or the money will be tied up for years. There are and will be multiple offerings once an investor has accumulating money, learning to say no is a key and not doing something often saves you money. One of the reasons to invest in dividend paying companies that over the years they have raised their dividends through various economic cycles, the stock price goes up and down but the dividend remains.

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

There will always be debate about global warming, but on one issue there is less rain than normal in many parts of the world. The world is drier than normal, what caused it, but we can see the results around the world. While individually we may like the drier weather, the reality is for plants and the food supply around the world, there is a limited time for the plant to germinate and grow and when the weather patterns change, the plant is stressed and crop yields fall.

If you are similar to most people living in the urban areas, you are a few generations from the farm. A generation or two ago, some of your relatives likely lived and worked in the rural area on a farm which means we all have a tie to farming. If a farm is large enough, it grows a commodity-based crop which prices move up and down. If one crop is more popular, farmers switch to another to bring in more revenues. With farming there is a lot of waiting and seeing about the weather.

In an article by Naveen Thukral of Reuters, if you examine the world agriculture picture, in general global wheat, corn and soybeans prices are likely to fall after several years of gains.

According to Ole Houe, director of advisory services at agriculture brokerage IKON Commodities in Syndey, Australia, Brazil is likely to produce less corn, China is buying larger volumes of wheat and corn on the international markets. The dryness which brought large parts of Asia in 2023 is forecast to remain in 2024 putting at risk supplies of rice, wheat, palm oil.

In India, the dry weather cut production and India’s government restricted export of some rice varieties. Lack of supply, increased prices 40-40%.

India’s wheat crop is expected to shrink; however India is the world’s 2nd largest wheat consumer of wheat and domestic inventories have shrunk. It is expected India will need to buy imports of wheat.

Australia has experienced dry weather which ended a 3-year dream run of record harvest of wheat.

On the bright side, production is expected to rise in both Brazil and Argentina with abundant rail fall over the farming areas. In Argentina. the Pampas region good rains in October and 95% of corn and 75% of soybeans were in excellent conditions.

Linking to dividend paying stocks, everyday we wake up and at some point will need to eat. Most of eat wheat, corn, rice, soybeans indirectly through the foods we consume. If the weather is normal and rains fall when they should and the crops grow, then life while having its up and down is generally good. In investing, if you receive a moderate return, understanding some years will be better than others, your risk reward equation will be in balance and that is a good thing. We may not the reason for the weather being drier than normal, but you can see it how the food manufacturers try to find alternatives to maintain margins.

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

In 2022, Washington passed the chips act which was giving incentives to the big chip makers of Intel, AMD, Nvidia and Samsung Electronics to build a chip plant in the states instead of offshore in Taiwan and China. The companies responded with Intel making plans to build a $100 billion plant in Ohio and Samsung and TSMC (Taiwan Semiconductor Manufacturing Co) announcing plans to build chip plants. In those respects, the chip act has done its job encouraging chip companies to manufacture in the US. However, computer chips are a global commodity which means other countries can match US incentives.

In an article written by Steven Scheer of Reuters, the government of Israel has offered incentives to Intel and others, but Intel is to build a $25 billion expansion to its Kiryat Gat plant. Intel has been in Israel for over 50 years and has received grants and incentives along the way. The recent $3.2 billion grant was accepted over a lower grant and lower tax rate, according to Ofir Yosefi, deputy director general of Israel’s Investments Authority. The grant is for 5 years with a corporate tax rate of 7.5% as opposed to 5%, the normal tax rate in Israel is 23%. The Kiryat Gat produces Intel 7 technology and the Centrino chip which enables the use of Wifi.

Itel VP Daniel Benatar said the grant will help ensure Israel remains a global center of semiconductor technology and talent. (the talent includes close ties to the Israel University sector).

Intel has been building plants around the world including near Columbus, Ohio in the US and Magdeburg, Germany where it plans to build two plants for $33 billion. The government of Germany has included incentives to Intel.

Linking to dividend paying stocks, a profitable company which can pay dividends tends to be in business for a long time. This long-time framework helps as the company analyzes its assets and builds more. Companies that are expecting to be in business a long-time are great partners for incentives by all levels of governments in multiple countries. Companies can pick and choose where they want to locate, and the incentives allow the company to help maintain margins over their competitors. Investors in dividend paying companies tend to like government incentives, but they raise your expectations to what level of incentives the company receives.

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

All over the world, governments try to impose standards on their citizens and as governments they can. Sometimes what the governments impose tends to affect a commercial company one way or another. Sometimes the effects are positive and other times they are negative, it is the reason why companies believe people in general should be in the middle or moderation.

In an article by Elaine Kurtenbach of the Associated Press, the posterchild for governments impose restrictions on their citizens is China. The country of China has the ability and often uses it to influence the correct decisions of the people. In 2021, regulators limited the amount of time children could spend on games to 3 hours of week, expressing concerns about addiction to video games.

In China, the 2023 China Game Industry Report showed sales revenue for the domestic online games is $55.7 billion with the number of people playing the games reaching 668 million. In 2023, 1075 game version numbers had been issued of which 977 were domestically produced and 98 were imported.

To understand China’s reactions, the country had very few landline phones, now days almost everyone has a cellphone. The companies such as Tencent Holdings make commercial transactions including banking much easier to do on the phone than most countries around the world. If the holders are not watching entertainment, they are likely playing a video game of one sort or another.

When the Game Working Committee of China Music and Digital Association made a decision to approve the games, the share prices of video-game makers such as TenCent Holdings Ltd and NetEase Inc., Huya Inc went up after falling for the past few years after approvals for new games were suspended.

Linking to dividend paying stocks, every company has to work within the legislative framework of the government, ideally along the way it lobbies to try to ensure the government does the correct policies, but once in a while politics come first. It is delicate management issue, but a clamp down on the greatest profit centers of the company should never happen, Clamp downs on marginal items can be done, because the company is not making profits and has a wonderful reason to get out of the area. Politics can work for the company.

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

Every year on the stock exchange, billions of dollars are made and that is where you hope to be on the side of, but billions are dollars are lost by the same smart people that made billions. What can you learn from the losses? In the movie, Wolf of Wall Street, the Leo DiCaprio character makes a terrific sales call. He says judge me not by my gains but my losses. (if you never seen the movie, there is a clip of the sales call on You Tube). The character goes on in the movie to miss the point the client should have the gains not just the stockbroker. The point is all investors will have losses in their portfolio, the issue is what did the investor learn from the losses. Remarkably few people invest to make a loss, for at some point there tends to be a gain, but losses do happen.

In an article by Sam Sivarajan, offers some ideas of how to learn from losses to limit them.

Beware Hubris

The world’s biggest bankruptcy was in office space rentals. Masayoshi Son, founder of Softbank, made a nearly $50 billion bet on the future of WeWork office space. The company went into bankruptcy because of its business model – how did it make money? The lost cost Softbank over $11.5 billion in equity loss and $2.2 in debts.

Aswath Damodaran, a professor of valuation at New York’s Stern School of Business asks, You can recover from mistakes, but how do you recover from the perception you don’t know what you are doing?

Overconfidence is one of the deadliest sins for an investor. If you have high trading levels, which is good for the firm you trade with, does it translate to higher returns? In a study of 300 professional fund managers 74% said they delivered above-average returns, 26% were average. No one said they were below average, but you will find many funds delivering less than the S&P 500 Index?

Herd Hysteria

In the world of crypto currencies investors in FTX lost money as it went bankrupt. The art NFT which were big hits in 2021-22, 95% are worthless. Billions of dollars evaporated. When both were going up in price, there was great media attention.

Lessons

What do you own and why?  – what has to go right to make you money? what can go wrong to lose money? Peter Lynch of Fidelity Investments said Know what you own and why you own it. 

If you do and something changes, you can possibly make changes.

What is your track record? – over the past 5 years how have your picks done? if your brokerage account is similar to mine, there are multiple charts to determine how you are doing. Has your portfolio performed the way you thought it was going to? what would be different in 2024? if you have not beaten the S&P 500 Index – why do you not own the index?

How much can you afford to lose when you are wrong? most of us buy stock expecting it to rise in value, but what if it turns out to be a loss. Some of the reason could be the market does not appreciate your decision; the markets in general were affected by world events; the growth of the company is not happening; how long would you hold on to it? to paraphrase Warren Buffet – when the tide went out were you caught swimming naked?

Linking to dividend paying stocks, most people come to dividend paying stocks in their portfolio after losing money or chasing growth stocks. Dividend stocks tend not to fall as much when the markets fall because they pay a dividend and the yield go up; when the market is up, they tend to trade at higher multiples but not as high as growth stocks. For dividend stocks, if you pick ones that can pay every year, over time the total return tends to be higher for losses are much lower. Money will be lost in 2024, hopefully it is not yours.

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