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.

In the world of commodity prices, the supply and demand charts from long ago are still the best charts to use. On the London Metal Exchange (LME) the commodities prices are determined.

In an article from Andy Home of Reuters for the first 6 months, the price of tin is trading around $31,800 a tonne or up 51% this year. Aluminum prices are up 25% and copper is up 21%.

The tin demand has not stopped but supply has. COVID has shutdown production in Indonesia and Malaysia.

Malaysia Smelting Corp which last year produced 22,400 tonees of refined tin had been forced to shut down and was already struggling with a furnace problem. One of the older furnaces has slowed production and the company has warned production will not be up to prepandemic levels until the end of the year.

Indonesia, the world’s largest exporter of tin has been struggling to lift production despite the higher prices. Exports were down 3% to 26.900 tonnes in the January to May period.

Linking to dividend paying stocks, there are some sectors that can be easily viewed by the supply and demand lens and they are simple to understand. How is the supply? What is the demand? Ideally, the bulk of your investments should not be tied to supply and demand stocks because although you can make a great deal of money on the upside, the cycle means you lose the money on the downside. Ideally the bulk of your money should be tied to companies which are profitable over any all cycles either through a monopoly or monopoly like conditions. In this fashion, stock prices go up, they go down, but on the long term your dividends and higher multiples for profitable companies means your wealth goes up.

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

When we shop we can think globally, but often we think locally, particularly with food companies, however many other countries around the world have the same or similar type of shopping in their country and if you love a particular sector in your country, one idea is to look internationally for similar companies.

In an article by James Davey of Reuters, in Britain, one of the biggest supermarket chain is called Morrisons. It was founded in 1899 and has grown to owing 85% of the nearly 500 stores and 19 mostly freehold manufacturing sites. It makes half the fresh food it sells.

Clayton, Dubilier & Rice (CD&R) made a bid of L 5.52 billion or put the company into play. The board rejected the offer as too low in June and since then JO Hambro made a bid of L 6.5 billion ($ 8.7 billion) then the bid was topped by Fortress Investment Group which is owned by Softbank. Apollo Global Management based in New York announced they were in the hunt for the company but had not made an official bid.

Similar to other countries in the world, the British supermarkets of Tesco, Sainsbury, Asda and Morrisions experienced a jump in sales with the pandemic in place, however the cost of ramping up online delivery hit profits.

Fortress has said it expects no material selling of assets and said its normal operating philosophy is to enpower existing management teams. Morrisons biggest shareholders are Silchester, BlackRock and Columbia Threadneedle or 3 big international investment firms owing 15.2%, 9.6% and 9.4% respectively.

Linking to dividend paying stocks, most of us are bias towards where we live, work and play which means our stock portfolios will tend to reflect this bias. It is good where you are you can easily determine if the company you own are doing well or not doing so well. It must be noted there are similar economies are the world and many of the people do the same thing. Sometimes there are great opportunities outside of your local area, sometimes it is better to stick to your knitting, just be aware and occasionally do homework to see if what alternatives there are out there.

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

Often because we are human we tend to see things as monolithic because that is the easy way to present them. But similar to many industries there are clashes underneath the easy headline. In the case of the oil industry, OPEC has been the monolithic group for years, ever since OPEC banded together to help raise prices or maybe it was the 7 Major Sisters needing a reason to increase prices. One never knows for generally it is a combination.

In an article by Stanley Reed of the New York Times News Service, there is fighting between Saudi Arabia and the United Arb Emirates (UAE) over production quotas.

Saudi Arabia wants production outputs to be cut, while the UAE wishes to increase production.

UAE has been using its vast resources to transform the country into a business, financial and tourism hub. The UAE has 98 billion barrels of oil or 6% of the world’s total.

Unlike the major oil companies who are feeling the heat by the courts and shareholder votes regarding climate change, the UAE does not have the same concerns at home. It you protest you might end up in jail.

The Abu Dhabi National Oil Company (ADNOC) plans to spend $120 billion over the next 5 years to increase production. Sultan Ahmed al-Jaber, chief executive officer of ADNOC has hired people to build a trading oil operation which is considered a key business tool by Shell and BP. He has sold stakes in pipelines and other infrastructure to investors such as KKR and BlackRock to raise billions of dollars.

Abu Dhabi has 2 large investment funds called the Abu Dhabi Investment Authority and the Mubadala Investment Co with over $900 billion in assets.

The UAE currently produces around 3.8 million barrels of oil and wants to raise it to 5 million a day by 2030.

At present the OPEC present production limit is 2.7 million barrels per day, which UAE considers unfair.

Saudi Arabia is the biggest producer of oil and they have multiple incentives aimed at keeping each country in line. Saudi Energy Minister Prince Abdulaziz bin Salman says he has to keep the balance between the countries.

Linking to dividend paying stocks, all companies are painted with a simple statement of what they do and making it simple has the advantage of quickly understanding what a company does. It does not have the advantage of what the company can and will become. Use the simple to determine if you like or do not like what the company is doing and then you can do more research to see the challenges and opportunities of all the companies in the group, just try not to paint all companies with the same brush.

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

The economy is opening up after COVID shut it down and that is a good thing. Governments around the world have battled a health care crisis and we are recovering, that is a good thing. It is not surprising that as the economy recovers changes are happening at a rapid pace and more and more involves technology. This is good because customers are served, not so good because once technology is in place, there is no turning back some jobs will be lost. If you think about the auto plants of Henry Ford time, there were thousands of jobs and to keep people on the job, Henry Ford offered higher wages. Those auto plants do not exist, the new ones go to You Tube type in making of F150 Fork Truck and see how many people are on the auto plant? The F150 is Ford’s biggest and America’s biggest selling truck.

In the service industry, automation has come partly because of a need and partly because after the pandemic starting wages have risen to attract people. Pre pandemic, if someone worked in the service industry the wage was near the minimum wage and to make a living, people needed to work well over 40 hours or had more than one employer. That has changed as people have choices to go to higher paying jobs or closer to $15 a hour.

In an article by Ben Casselman of the New York Times News Service, employers have been making choices because they need bodies or automation.

When Kroger supermarket customers in Cincinnati shop online, their products may be picked by a robot in a warehouse, not by a person in their local supermarket. If successful it will be rolled out to more stores. The warehouse is 375,000 square feet and uses more than a 1,000 robots.

Gamers at Dave & Buster’s in Dallas who want pretzel dogs can order and pay from their phones – no need to flag down a waiter.

At the drive-through lane at Checkers in Atlanta, the request is done by a voice recognition algorithm.

For years we have seen technology focused on the manufacturing world and when there are repetitive movements on a regular basis, robots are very useful to use. The robot does not have sick days, it works when the line is moving and it is capital depreciation asset. Now technology is going into the service businesses and when it goes in, it is very difficult not to use it.

Shana Gonzales, a Checkers franchisee in Atlanta was having a hard time finding workers and thought there could be another solution. She contacted Valyant AI, a Colorado based startup that makes voice recognition systems for restaurants. It took a while for set up and testing but it has worked very well and she has added the service in her other Checkers restaurants.

Ms. Gonzales has 4 restaurants and needs 30 people if she could find them. The pay in Georgia was $9 a hour and she has increased it to $10 a hour. Technology is easing pressure on the workforce. If she paid $15 a hour she might be able to fully staff, but would have to raise prices which might cut sales.

In a survey of 300 global companies at the World Economic Forum this past year, 43% of the businesses expected to reduce their work force through new uses of technology.

Some economists see the increased investment as encouraging, some do not. Some people in the industry see good in technology, but if the idea is to make it very simple why would somebody spend a career in the industry?

Linking to dividend paying stocks, all profitable companies need to need to use technology to their best advantage and see the glass half full. When one company is using technology to meet customer demand, others will hear and see what they are doing in the trade journals and follow suit. One company will have an edge and the large profitable companies buy the company to offer their customers the edge, is an age old story. Profitable companies do not have to be on the edge, they have patience to see the positive affects and the resources to duplicate to maintain their market share and margins.

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