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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.