In every country there exists cities because of their location, seemingly central to every other part of the country the city grows. In China, one of the cities that is a top national transportation hub is Zhengzhou. The city is located about 1,000 miles south west from the capital Beijing and has 12 million people, but it is the junction for major north-south and east-west high speed rail lines. China uses coal for generating electricity and many of the trains come through Zhengzhou, as well as the province of Henan is a major producer of grains, raw materials and manufactured goods.

In an article by Dominique Patton of Reuters, in July in 3 days, one year of rain fell which flooded the rivers and flooded the city. If you ever have watched what happens when a dam breaks, a rush of water flows through the downstream and the water has the forces to wipe out anything in its way. For us that means roads, bridges, cellphone towers, poles which carry electricity and the list goes on. The water picks up dirt along the way and deposits it whenever it reaches buildings which means when the water eventually goes down everything is dirty or needs to be cleaned or tossed out.

In planning for disasters such as floods the first response is people, then infrastructure and somewhere near the end homes. For people not in the city, after the people the first concern is the supply chain which has been not out, when will it be able to function. For a city such as Zhengzhou, analysts worry about which companies have significant production facilities and how long will they be non producing.

Linking to dividend paying stocks, all profitable companies typically have more than one location for their suppliers although they typically receive more from one location than another, but they have back up for just in case. It is good practice and production can be increased at the other facility, although it does take time. For the companies you invest in, what does their supply chain look like? how did the company handle the last time there was an shutdown in the supply system and with global warming how would it handle longer delays?

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

In every analysis one has to look at the glass and say it is half full or half empty? The market will react to all types of news and events, but one ability for institutional investors is to examine the cash on balance sheets of the S&P 500 companies.

In an article by Lewis Krauskopf of Reuters, according to Keith Lerner, chief market strategist at Truist Advisory Services, cash on balance sheets of S&P 500 companies has increased from $1.5 trillion to over $1.9 trillion when compared to the pandemic crisis in early 2020.

We know when consumers have cash, there are 2 things to do with it – spend it or save it/invest it, companies can do the same thing. The difference is when companies do it, shareholders can benefit.

If the company does a stock buyback, it has the affect of lowering the number of shares outstanding which means if the company trades at the same multiple, the price can raise to match the previous multiple. Companies have announced $350 billion in buybacks in the 2nd quarter, the largest since the 2nd quarter of 2018 when $275 billion was announced.

Another way to spend the cash would be to increase the dividend directly to shareholders, although if a company increases the dividend, it would be expected to pay the same dividend or increase it the following year. Total S&P 500 Dividend payouts rose 3.6% in the 2nd quarter, although that was short of the record payouts in the first quarter of 2020, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

If the company decides to invest the money as some will, Goldman Sachs is projecting S&P 500 cash spending on mergers and acquisitions will jump by 45% to $324 billion this year.

Linking to dividend paying stocks, if the stocks you own are profitable, expect to be rewarded one way or another as the company decides what to do with the extra cash. Deciding what to do is always a good position for a company to be in.

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

Most of believe that in the future technology is going to solve some of the problems on earth, we are not positive how, but we believe in the future of technology. It may and that is why technology stocks are a good thing to invest in, but which ones is always the question.

The biggest and best technology company for generations was IBM or International Business Machines. They were an early leader, had most of the large corporations and governments around the world as clients. The men and they were mostly men had a distinctive shirt and tie uniform and they were the problem solvers.

Part of the promise of technology is artificial intelligence or AI and the US looked to IBM to bring AI into the fold of computers. The majority of the public really does not know how the computers to work, only the promise of AI was going to make life in the future simpler and better.

In an article by Steve Lohr of The New York Times News Service, about 10 years ago, there was a contestant on the game show Jeopardy! who seemed to know all the questions. Could the supercomputer beat the contestant? IBM had a team and there was a show with their computer Watson and the computer won. For the public the results showed the promise and hope of AI, but what about at IBM?

The scientist behind Watson had a warning, beware what you promise. David Ferrucci, explained that Watson was engineered to identify word patterns and predict correct answers for the trivia game. It was not an all purpose box to take on the commercial world.

After Watson won the game, IBM poured millions of dollars in promoting Watson to their customer base and saw opportunity everywhere. However, it did not pan out in more contracts or advances into AI, the company is the fourth largest cloud computing company behind Amazon, Microsoft and Google. In the last 10 years, IBM’s stock price is down 10%.

Clearly the hype and challenges were more difficult than expected. Perhaps because IBM’s executives knew sales and service better than technology, perhaps they had too much money and could invest in just about everything, in any rate there has been many wrong turns and mishaps. Perhaps the idea was wonderful, the ability to execute was always need to be a catch up to match public and corporate expectations.

Linking to dividend paying stocks, in the business pages there are press releases from companies discussing opportunities they see in the marketplace. There are many opportunities to be seen, however what sets dividend paying companies and other companies is the ability to generate sales and profits. The issue is never the opportunity, the issue is can the product or service bring in sales and profits or is it better to wait and buy the companies in the space when they demonstrated sales and profits? No company gets it right all the time, but companies that can pay dividends tend to be selective enough to get it right to make profits and pay dividends. The total return on both the stock price and the dividends is the reason why you want to be a long term holder.

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

The third largest economy after the US and China is European community. The European Community is being affected by climate change more than the biggest economies who still place economy over environment. In the up coming climate talks in Scotland, Europe is planning to go big and make dramatic changes.

In an article by Steven Erlanger and Somini Sengupta of the New York Times News Service, Europe is changing policies and regulations to reduce green house emissions by 55% from 1990 levels by 2030. The grand total is to be net-zero for 2050. President Ursula von der Leyen of the European Commission put the world on notice by saying our current fossil fuel economy has reached its limit. Changes must be made and soon.

The implications are investments in clean energy to reach 2030 could top over $1.4 trillion, according to BloombergNEF. The policies and regulations will be aimed at those targets.

The first measure will affect the auto sector and by 2035 the sector needs to have zero-emissions vehicles. The switch will be from gasoline and diesel to electric and other zero emission vehicle. By 2035, vehicles in Europe will not have a tailpipe at the the back of the vehicles.

Other areas are to increase increase CO2 that can be absorbed by trees and farms or plant more trees. Energy efficiency is top of mind for all industries.

Renewal energy to increase from 32% to 40% or double what it is today.

The wealthier countries are going to help the poorer countries in Europe to make the transition with a Carbon Border Adjustment Mechanism border.

The rest of the world has to adapt because the companies in Europe will make it standard to ensure their customers supply chains meet the European standards.

Linking to dividend paying stocks, profitable companies have benefited from current policies, but change is it the offering and if the third biggest market is moving in one direction, a company which sells into the market has to show it is on the same path. How are your company investments moving towards less green house gases?

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

When former President Trump was in power, his slogan was America first and bringing manufacturing back to the US. It was a good slogan for it gave some hope to people whose companies had move production from the US to China, but it was backed with little in government policies. It was more slogans and pointing to one offs, than really bringing manufacturing back. The proof is is how is China doing?

In an article by Keith Bradsher of the New York Times News Service, China has prospered during much of the COVID pandemic as the world’s factory. Demand does not appear to be slowing as Western economies reopen.

China’s General Administration of Customs reported the country’s exports in June was up 32.2% compared with the same month of a year ago. The increase came despite Yantian Port in Shenzhen being closed down for a month because of COVID and medical supplies exports have leveled off.

Louis Kuijs, head of Asia economics in the Hong Kong office of Oxford Economics noted a third of the increase in value of Chinese exports might reflect rising prices. Chinese factories are passing own their own higher costs to foreign consumers. By raising prices, the Chinese can preserve their profit margins.

Port and shipping delays are also driving the prices up as cost of shipping a 40 foot cargo container across the Pacific has increased from between $4,000 to $5,000 to as high as $18,000.

At the large ports, the number of containers continue to back up partly because of demand and partly because some were shut down due to COVID, however no one really knows when the companies will catch up to the backlog. Simon Heaney, senior manager for container research at Drewry Maritime Research said the hope is the Chinese New Year when factories typically close for several weeks. The problem is the Chinese New Year starts in late January.

Linking to dividend paying stocks, logistics is part of every company and the issue is not just the supplies but can the company pass higher costs to consumers? If not profit margins fall or people will look to alternatives. It is a fine line which profitable companies over the years have demonstrated they can manage. How does your companies you invested in raise prices and continuing to earn good margins?

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

In all industry segments, companies have to determine who are their customers and concentrate on them. Sometimes the customer is the general public, but often the public is a segment of the public. Hopefully the company understands and serves that segment very well and those customers are loyal repeat business and the company has reasonable margins to be profitable. In the world of investment banking, Goldman Sachs is an institutional focus which includes governments around the world, the large corporate companies, investment managers, pension funds and hedge funds and their own fund. The good news is institutions tend to pay their bills and are regular users of Goldman Sachs expertise. The bad news is they are looking to save money and outperform the markets on a yearly basis, without being indexed.

In an article by Noor Zainab Hussain and Matt Scuffham of Reuters, Goldman executives said a record backlog of deals will help drive profits for the rest of the year after the bank smashed 2nd quarter estimates. In the 3 months ending June 30, Goldman announced $1.5 trillion in deals, up 13% from the first quarter.

Goldman’s investment banking’s revenue rose 36% to $3.61 trillion in the last quarter, which allowed them to retain the top ranking of global M&A advisory according to Refinitiv.

Total net revenue increased to $15.39 billion or $15.02 a share, beating estimates of $10.24 a share.

The global markets business which includes the trading business reported a 32% decrease in revenue.

Linking to dividend paying stocks, as you examine your investments pay attention to what market segment they target and whether they are maintaining or increasing market share. In the institutional field, a few percentage increase can generate extra profits because of the volumes. (Goldman CEO noted a 160 basis points of market share). In the institutional market execution is very important or firms move money to other firms.

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

If you watch what happens in the Senate as they debate whether the government should spend money on the economy, you will hear different views. One wonders if the views are tied to the political party the Senator talks about or whether the Senator actually examines their state and determines what the majority of their citizens need and what kind of society we should have. COVID has not many things, but one thing it does show are there are inequities in the system and some of them seem to be institutional in nature.

One method to know if the amounts being discussed are too big or not big enough is to examine what other countries are doing. In an article by Marc Jones and Tom Arnold of Reuters, China’s leadership made a decision to spend one trillion yuan or $192.3 billion boost to the economy.

The People’s Bank of China (PBOC) cuts its reserve requirement ratio (RRR) by 50 basis points. The policy ends 9 months of gradual policy tightening by authorities eager to prevent credit growth getting out of control.

Analysts at Morgan Stanley believe this was a shift from countercyclical to an easing bias.

UBS’s head of emerging market strategy Manik Narain said the move was fine tuning rather than a screeching U turn by the PBOC. About 400 billion of the one trillion the RRR is estimated to be worth to be used to repay existing PBOC’s medium term lending facility funding; while 700 billion yuan of tax payments are also due soon.

From a global perspective, it was a reminder that reeling in COVID support measures is not going to be a smooth glide for anyone.

Many China watchers believe pent-up COVID demand has peaked and growth rates will be more moderate. The economy is expected to grow at 8%.

Linking to dividend paying stocks, many economies around the world operate in similar fashion and they try to help the people in the country. Rebounding from COVID is not going to be equal and government bankers have to take that into consideration on what they can do and should do. Moderation is generally to be expected.

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

If you have been watching the weather reports this summer you are aware it is warmer than usual across the west with drought conditions and forest fires reported on a daily and weekly basis. It seems since the conditions happened last year, they will be the new normal, the weather has changed and it is not always for the best.

For the past 100 plus years, our economy’s backbone has been the oil and gas industry which has brought a lot of good and not so good. However, the big oil companies have recognized they play a role in helping carbon emissions fall and BP has an annual energy review.

In an article by Ron Bousso of Reuters, BP’s chief economist Spencer Dale noted last year was the biggest fall in carbon emissions in more than 75 years, however the reason was COVID and government lockdowns. However he noted as economies around the world open up, which is good, the gains will be likely transitory.

The economic slowdown in 2020 led to 4.5% drop in global energy demand and a 9.3% drop in oil consumption. In April 2020, oil demand dropped 20% or 20 million barrels a day.

Mr. Dale noted those are the trends we want to see as the world transitions to net zero – strong growth in renewables nd wind and solar capacity expanded rapidly in 2020, but not enough to affect global warming as the economy opens up again.

Linking to dividend paying stocks, in every industry there are exciting new technologies that will help use less energy and they are being adapted, are they quick enough for the global warming to slow is any one’s guess but you can look at the companies you invest in to see what they are doing. Are they part of the problem or part of the solution, for if they are part of the problem some investors will try to avoid the stocks. If they are part of the solution, even if it is at the margins, then more investors will buy their stocks and that is a good thing.

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

About a month ago, the Federal Reserve announced the banking sector had faired better than expected throughout COVID and relaxed some of its restrictions. This was good news for the 5 biggest banks and all of them announced share buybacks and higher dividends. If the 5 biggest banks are doing well, what about the entire sector particularly given banks make money by giving out credit for a fee or loans. As long as loan losses are very low, banks should be profitable.

Sean Pugliese and Allan Meyer Elkon & Wickham Investment Counsel Inc examined the sector to come up with some answers. Their criteria was:

the bank sector in the S&P 500 index

market capitalization as a safety factor, the larger the banks to be more stable and have diverse revenue streams

dividend yield is the annualized projected dividend divided by the recent share price

Debt to equity ratio is the total debt outstanding divided by shareholder’s equity – the less debt the better.

price to earnings ration (P/E) is the recent share price divided by the projected earnings per share. The lower the number the better the value.

Price to Book (P/B) compares the recent share price with the book or equity value per share. The lower number is preferred.

ROE is a profitability ratio (net income divided by shareholders’ equity) a higher number is better

Company Recent Mkt Cap Div Debt/ P/E P/B ROE 52W Ttl

Price $ ($ bil) Yld % Equity % % Rtn %

JPMorgan Chase 156.03 472.3 2.3 194.1 25.2 1.7 12.0 68.9

Bank of America 41.15 352.6 1.7 165.1 13.3 1.3 6.8 77.8

Wells Fargo & Co 45.07 186.3 0.9 147.1 12.2 1.0 1.0 79.3

Citigroup Inc 70.41 145.5 2.9 243.6 8.1 0.7 5.9 40.8

US Bancorp 57.57 85.8 2.9 97.6 12.7 1.7 10.0 62.0

PNC Financial 192.79 81.9 2.6 62.4 14.4 1.5 11.8 93.2

Trust Financial 56.3 75.4 3.2 59.4 11.8 1.1 6.8 58.5

First Republic Bank 190.55 33.6 0.5 15.1 37.9 2.6 9.3 81.2

SVB Financial Group 565.21 30.7 0.0 10.5 20.9 3.1 16.8 164.8

Fifth Third Bancorp 38.4 27.1 2.8 68.9 11.6 1.2 6.2 111.4

Huntington Bancshares 14.35 21.2 4.2 65.7 10.2 1.1 6.8 71.5

KeyCorp 20.72 20.1 3.6 81.7 10.0 1.1 7.9 81.1

The other banks on the list were Citizens Financial, Regions Financial, M&T Bank, Comerica, Zions Bancorp and People’s United

Linking to dividend paying stocks, the economy is based on credit and when credit is flowing banks do very well. The Federal Reserve ensured banks would survive and come out of COVID well positioned to help the economy grow by providing loans. Fortunately most banks are in good shape and the stock performance reflects the situation. It is hard not to own a bank in a dividend portfolio and if you are normal person you have a bias towards the bank or banks you use or are in your region. However banks operate in all regions of the country and list such as these say we might broaden our horizons.

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