Every country as well as company does not want the rating agencies to downgrade its debt because credit and access to credit is the aspect which keeps the economy going. A downgrade automatically means higher interest rates or more money to pay for interest costs.

In an article by Elaine Kurtenbach of the Associated Press, China’s Finance Ministry denounced a report by Fitch Ratings that keep its sovereign debt rate as A+, but downgraded its outlook to negative.

China’s Finance Ministry said China’s debt is a moderate and reasonable level and risks are under control.

Fitch Ratings believes risks to China’s public finances are rising as Beijing works to resolve mounting local and regional government debts and to shift away from heavy reliance on its troubled property industry. Fitch added China is a large and diversified economy and vital to global trade and China does have large foreign exchange reserves.

The Finance Ministry disagreed with Fitch Ratings and faulted its methods. The Ministry said China was appropriately intensifying improvement quality and efficiency of its government spending. Overall, our country’s local government debt resolution work is progressing in an orderly manner and risks are generally controllable.

Fitch noted China’s debt is forecast to rise to 7.1% of GDP, up from 5.8% in 2023. The median for countries with an A rating is 3%.

Tax relief measures and weaker property investments, which are usually a main source of local tax revenue have eroded the government’s capacity to collect tax revenues to offset the high government spending.

Fitch believes the Chinese government GDP will grow to 4.5% down from 5.2% last year.

Linking to dividend paying stocks, over the past 30 years, China’s growth has very good, but since COVID, the economy is slowing down. There has been a desire by manufacturers to move some of their operations out of China, as well as the property industry was 30% of the economy. Local governments funded their spending by selling property, that has slowed down or stopped. China is still a large economy, it is just not growing the way it used to grow. However, all companies and countries reacted the same manner as China. They say it was a flawed study, they missed the good stuff, they did not count the potential. If the CEO begins to say those type of things, find alternatives quickly.

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

In every industry, there is a stock which lags the leaders, individually you may think it is doing ok but compared to the competition they seem to be better. In the banking industry, the company that lags is Citigroup. There are multiple reasons for it and CEO Jane Fraser is trying to improve the company.

In an article by Tatiana Bautzer and Saeed Azhar of Reuters, if you bought Citigroup in the last year, you likely made money as the stock is up 49% since September of 2023. However the stock trades at 0.57 of book value that is short of JPMorgan Chase of 1.73 and Bank of America of 1.1.

Wall Street investors welcomed the job cuts of 5,000 for the workers represents expenses to control and investors similar to Daniel Babkes, portfolio manager for Pzena Investment Management which manages $60 billion and owns Citigroup. Mr. Babkes also says there is potential and as the stock is low, there should be room for upside growth.

Ian Lapey, a portfolio manager of Gabelli Funds, which manages $30 billion and owns Citigroup, says the outlook for Citi is improvement. The jobs cuts were good, the quality of the loan portfolio and it has reduced exposure to paper losses on securities.

Hunter Doble, a portfolio manager at Hotchkis & Wiley which manages $31 billion, believes the job cuts improved efficiencies. He noted in Citigroup can meet the bank’s target of 11 to 12% return on tangible equity, the stock should move forwards.

Similar to every other bank, wealth management is a potential growth area and Citigroup recently hired outsiders to run the departments. Bank of America analyst Ebrahim Poonawala noted the outsiders will drive change.

Existing employees will need to sign on to the changes as the promotions after the job cuts went to outsiders.

CEO Fraser said Citi will leverage its relationships with the world’s largest corporations to boost revenue in investment banking and wealth management.

Another area of focus is Citigroup’s US consumer business which is much smaller than its competition. Retail deposits account for $105 billion of the $1.3 trillion in deposits, compared to JPMorgan Chase and Bank of America which have more than $1 trillion in consumer deposits. Part of the reason is the branch network, Citi has 700 branches, the others have much more. (if a bank has large consumer deposit, there will be a healthy balance which the spread between interest paid to consumers and loans to consumers and business).

Linking to dividend paying stocks, when you are doing your homework for your investments, you will notice some companies have advantages over others. The companies in 3rd, 4th and beyond have to great execution compared to the top 1 or 2 just to move towards a level playing field. It does not mean the top 1 or 2 has to continually improve, but with their built-in advantages they seem to be natural choices for your investments. You can hope for the underdog, it is a great story but if you want consistent profitability, it is better to choose the stocks with the best advantages.

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

Are you planning to fly during the summer? If you are, you will be one of 4.7 billion people expected to travel in 2024 compared to 4.5 billion in 2019. On a personal level that is good news, on a macro level, the global airline industry is having problems because of production problems at Airbus and Boeing.

In an article by Rajesh Kuman Singh of Reuters, air carriers are spending billions on repairs to keep flying older, less fuel-efficient jets and paying a premium to secure aircraft from lessors. At the same time, some carriers will be trimming their schedules because they have no planes.

According to Martha Neubauer, a senior associate at AeroDynamic Advisory, passenger carriers will receive 19% less aircraft because of production problems from the duopoly of Boeing and Airbus. US carriers will receive 32% less planes because of dependence of Boeing’s 737 Max. In Europe, Airbus as many as 650 A320neo jets could be ground because of a flaw in the RTX Corp’s Pratt and Whitney engines.

Similar to car rentals, there is a healthy aircraft leasing industry and the rates per month to lease an Airbus A320neo or a Boeing 737-8 Max have reached $400,000 a month, the highest since 2008.

If you cannot lease, then planes have to be repaired, repair costs are up 40% at United, Delta and American Airlines.

Last year, American airline companies posted a 4.5% pretax margin, expect it to be down in 2024.

Linking to dividend paying stocks, all industries can be examined from a macro level going down to a micro level for in every industry there are standout companies. Technically they all do the same thing, but some make more profits than others. For the investments you have, you always want to own the best of the breed and as long as they maintain the metrics you will have fewer concerns expect to collect your dividends.

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

Every time there is a conflict between 2 countries, whether it is good or bad, there is always another country which suffers because of the conflict. For example, the shortest route between India and Rotterdam, Netherlands in Europe is using the Suez Canal and the average ship takes 19 days, the alternative is to go around Africa which averages 48 days. To use the Suez Canal is to pay a fee to the company which is owned by the government of Egypt and in 2022-23 the fees were $9.4 billion. Ever since the Houthi attacks on ships using drones, even though the US and British Navy are providing protection, fees have dropped in half, because ships are finding a more expensive but safer alternative.

In an article by Eric Reguly of the Globe and Mail, the Suez Canal has been in operation since 1869, and the ships have created cities and jobs in Egypt. The attacks on the ships trying to use the canal, have damaged the economy of Egypt.

The country of Egypt is suffering from high inflation, nearly 1/3 of its population of 110 million live on $4 a day. The country has significant debts and since 2022 its currency has been devalued 4 times.

To the south of Egypt is the country of Sudan where there is an internal struggle for control which means the war has sent about 300,000 to Egypt according to the UNHCR or United Nations refugee agency. Meanwhile to the east of the country, Hamas and Israel are still fighting and thousands of Palestinians have gone to Egypt some paying $5,000 a head to secure a visa.

Traditionally the Pyramids have drawn many tourists to Egypt, but according to S&P Global Ratings Egypt’s tourism revenues are set to fall 10% to 30% shrinking economic growth and foreign exchange reserves.

Egypt has received $50 billion in international assistance from the UAE, the IMF, the European Union and the World Bank.

Linking to dividend paying stocks, for every disturbance in normal patterns there is analysis by a variety of agencies to determine the credit worthiness of countries. The same goes for companies, we expect normal routines, but if something happens out of normal, insurance companies and rating agencies will run numbers to determine potential impacts. There is reason why a credit card used to advertise no surprises, there should be little for your investments. You can determine what would be the impact if something was not normal and then maybe alternatives are better for you.

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

We are all from somewhere and it is very helpful to us if the other jurisdictions where we would normally travel have good relations. The somewhere we are from has it own wonderful things, otherwise why live there as well as some negative aspects. Sometimes the other jurisdiction says the negative aspects flow into their jurisdiction and the easiest way to stop it is ban it. What happens at the local level also happens at the national and international level.

In an article by Fatima Hussein and Ken Moritsugu of the Associated Press, for the past few years the US and China relations have not been the normal good relations. For decades, the US moved manufacturing to China and it was very hard for any manufacturer to keep manufacturing in the US, for the investors asked why have you not moved operations to China? As the manufacturing was the first step, the services and other expertise developed and soon politicians began to ask why is the manufacturing in China? it should be in the US, although there were a number of bills passed which encouraged companies to move operations. China is presently going through a restructuring because manufacturing companies have left China as well as the property market values have decreased. Government spending on infrastructure has slowed because much of it has been built, it still needs to be maintained but the building phase is slowing.

US Treasury Secretary Janet Yellen met with Chinese Premier LI Qiang and sent a message of mutual co-operation. The US is the world’s largest economy, China is second and both have fought over a variety of issues. However, when the US put up restrictions, China sought alternatives including more trade with Russia. The US and Russia are at odds over the war in the Ukraine, so it is better for the US to have better relations with China.

Linking to dividend paying stocks, many of these companies will have operations outside of the US and it is good to know although countries will have some differences, they are generally more working together than against each other. In the world of geo politics, relationships ebb and flow for various reasons, as long as your investments are with companies the US has good relations with, there is less need to be seeking alternatives.

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

In the world of politics, there has been many different sayings to get people elected. In the current US election cycle you may hear are you better off, then you were 4 years ago. This is designed to vote for the other person, because the politician saying it wants to hear you say no. If you say yes, then he or she will not get your vote. In the days when consumer goods such as electric stove was being common, a popular saying was a chicken in every pot. In symbolized both the ability to afford the new stove as well as food to cook. In India, it is a little different.

In an article by Sarita Chaganti Singh of Reuters, the odds on favorite person to win the leadership or Prime Minister of India is the current PM Narendara Modi. The PM is running on making the economy of India the 3rd largest in the world, up from the 5th. The US is the largest economy with a $25.5 trillion followed by China at $17.9 trillion, next come Japan at $4.2 trillion , Germany at $4.1 trillion and India at $3.51 trillion. The others in the top 10 are UK ($3.1 trillion), France ($2.8 trillion), Russia ($2.2 trillion), Canada ($2.1 trillion) and Italy ($2 trillion).

PM Modi asked officials to finalize plans to expand the economy to $6.69 trillion up from $3.51 trillion by 2030. This would raise the per capita income from $2,500 to $4,418.

Mr. Modi wants exports to jump from $700 billion to $1.58 trillion or 4% of global trade. The other goals are to increase literacy from 78% to 82%; unemployment to fall to less than 5% from 8%; and labor participation rate to increase to 50% from 46%.

In 2047, India will be a 100 years old, Mr. Modi hopes it will be a developed country by then.

Linking to dividend paying stocks, during the AGM companies will often talk about the future of the company but it is rare for a politician to talk about growth of GDP, because countries can only do so much, the private sector has to do the rest. Perhaps PM Modi will use government resources to build infrastructure in the hopes of spinoffs, but we have just seen in China, the government using the property value increases to do the same, however prices go up and down. But it should mean India is worth watching over the next few years.

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

In the investing world there is a great deal of looking backwards because we do not know the future but we can project some knowns from the past. If you believe in cycles, eventually the market will go higher and lower, when it will happen is the tricky part. If you are investing for the long term, looking at past history for profit companies that can and did pay dividends for years and decades and some cases generations is a very good thing to do.

In an article from Reuters, one of those companies that paid dividends and the stock also outperformed the market was GE. The lightbulb was the consumer aspect of GE, but it was active in many subsidiaries that went put together rose to be the most valuable US corporation and global symbol of American business power. The GE company was a spot in the Dow Jones Industrial Average for more than 100 years.

In 2008, the high-flying GE Capital was loaded with both leverage and mortgage bonds and when that market tanked to be pennies of the dollar, GE was worth pennies rather than dollars. Before 2008, the CEO demanded all divisions either be 1,2 or 3 in market share or be sold. To reach the level, risk was taken, sometimes risk is wonderful, sometimes it is awful.

The new CEO was put in and is still Larry Culp and it has taken almost 15 years to turn the company around. Mr. Culp focus has been on paying off debt by selling assets and improving cash flows by steam lining operations and cutting overhead costs. The company is smaller and leaner as compared to before 2008.

The company has broken the company into 3 which all trade on the stock exchange, GE, GE Vernova – the aerospace and energy business and GE Health Care. CEO Culp has slashed more than $100 billion in debt and quadrupled its free cash flow since 2018. Its market cap was grown from $100 billion to $192 billion.

Linking to dividend paying stocks, with these stocks you will like the fact they can pay dividends on a consistence basis and for the most part you really only look at them a couple of times a year. The point of this column is when companies get into trouble, it will take years to return to their formal balance of power. While the company is transforming itself, it will take years to regain its traditional stance in the markets ratings. Perhaps it would be easier to watch the development while you see alternatives. Love people, company stock you can buy and sell.

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

If you were going to eat fish at a restaurant or grill on the BBQ, one of the choices you might make is salmon. When you consider the good elements of the food and the other things with salmon, you can eat well and feel fit in your choice. Salmon are one of the meat-eating fish or it consumes smaller fish and there are multiple reasons why it is everyone’s favorite fish. The issue which comes up is salmon still good for you now that it is primarily sourced from farmed fish? A book called Salmon Wars by Douglas Frantz and Catherine Collins published by Henry Holt and Company, New York, 2022 would suggest otherwise.

For generations salmon was the fish that was born in a small stream, grew up and went to the ocean to come back to ensure the new generations are born on the small stream up river from the ocean. How it knew where to come back is a mystery, but it is does. The fact that it had to come up river meant millions of fish would come back and to be a fisherman meant fishing during spawning season was a good thing and would ensure no one went hungry, later in the year.

For every commodity, once it becomes popular the mystery behind it falls and someone will try to domesticate the commodity to what are known as industrial farms. If all the animals are healthy, then profits are to made in the industry and very good profits will be consistent.

The downside of industrialization of animals is the manure or waste of the animal. What happens to it and how is it treated. The first years of the industrial farm the land can absorb the wastes, by the third year there is saturation of wastes and the wrong bugs come in to harm the animals. In the case of salmon, it is lice. Then to battle the lice, new chemicals are used until the lice adapts, the new chemicals are not so good to humans.

To keep the salmon in the nets in the fish farms, the waste falls to the bottom and is not treated. At first it is dumped to the other side in the hopes the currents will wash it away, and in reality some will be, but much will not be and the food system begins to break down.

From the governments side, fish farms seem to be a good employment opportunity and there are some jobs created, but government subsidies for the jobs tend to be quite high. Rather than giving millions to companies, would it be better to give it to the people in the area and they will have higher standards of living? Politicians like cutting ribbons, so it is easier to give to companies.

In all industries, the use of technology and artificial intelligence to help produce and sell the commodity is being used. Perhaps technologies will make fish farming less harmful to the environment. Can the smaller scale examples be scaled up to meet the consumer demand?

Linking to dividend paying stocks, these companies make money to continually pay dividends and in the long term the stock appreciates over the years. Ideally as an investor you look to the long-term for how companies do their operations, the more sustainable, the better. There are downsides for industrialization of commodities, hopefully your dividends encourage the company to continually use technology to improve and lessen the downsides or by higher priced cuts of meat that are sustainable.

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

If you ever seen the movie The Founder about growth of McDonald’s from a regional restaurant to a national and worldwide dominance, the cost of the hamburgers was 15 cents. At that price, all income groups flocked to the restaurant and Roy Kroc could have dreams, ambitious, and the ability to grow. Over the years, prices increased and many could easily remember the advertisement 2 can dine for $5. Now days that does not buy much food. What should executives do?

In an article by Waylon Cunningham of Reuters, the increasing prices at fast-food restaurants have made people skittish down the income level, and executives said they worry about losing business from those on tight budgets.

Roughly a quarter of low-income consumers, defined as those making less they were eating less fast food and about half said they were making fewer trips to fast-casual and full-service dining establishments, according to polling in February by Revenue Management Solutions, a consulting firm.

A recent census Household Pulse Survey showed half of people earning less than $35,000 a year had difficulty paying everyday expenses, and nearly 80% were moderately or very stressed by recent price increases.

An example was a person who used to stop by McDonald’s to 2 double hamburgers, drink and fries. As prices rose the lady switched to 2 cheeseburgers and dropped the drinks. When prices rise she asks can she justify the spending?

About 1/3 of Black American households, and 21% of white American households, earned less than $35,000 in 2022, according to the latest available US census data.

For fast-food companies that often promote an image of affordability, low-income consumers are a significant portion of the customer base and a bellwether for longer-term trends. But they are typically the first to cut back spending and the last to come back.

But now, chains may be less likely to chase customers as hard as they have in the past because even with a drop in traffic, sales have remained consistent supported by increased prices.

Fast-food companies are not in a hurry to take traffic over profit as they were in a decade ago, says Mike Lukianoff, chief executive of SignalFlare,ai.

In 2008, Subway introduced the $5 footlong which became the poster sandwich for the Great Recession.

In 2016, McDonald’s after a prolonged slump in sales, introduced a bundle deal in called McPick2 allowing customers to pick 2 items for $2. Within months, Wendy’s offered 4 for $4.

Now, instead of across-the-board menu slashes and broad discounts, industry analysts say chains are being more selective, aiming them at specific demographic or limiting them to specific meal times or channels, such as its app or only through delivery.

The battleground is certainly with that low-income consumer or those earning less than $45,000 said McDonald’s CEO Chris Kempczinski.

For major fast-food companies, loyalty apps are the go-to-strategy among major brands to increase retention and the average amount of money spent. The upside for chains is they capture more transaction data and demographic data about the consumer, noted David Henkes, senior principal with Technomic.

Linking to dividend paying stocks, for all consumer companies reaching out to their customer base is a continuing challenge. For companies that try to appeal to all income groups, how to capture at least some of the purchasing power of lower- and middle-income groups is a function of value, how to give value and how the consumer feels value is shown. For the chains, as long as the next income group constantly goes to the chain, they can make profits. If you read about retail strategies, there seems to be no one answer. As an investor, you have to make a decision if you believe the company is giving good value. If no, you will need to find alternatives.

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