If you were to think back on 2020 and ask yourself do you think China would show economic growth, given former President Trump has imposed tariffs and was recommending US companies doing business in China do it the US first? Likely you would tend to think China would have limited growth because some of the world’s largest multinational companies are based in the US and China plays a large role in their strategic plans.

In an article by Gabriel Crossley and Kevin Yao of Reuters, China is the world’s second largest economy after the US, released official data which should growth beating expectations. The Gross Domestic Product (GDP) grew at 2.3%, even accounting for the response to the global pandemic. China is expected to have the highest growth in 2021 at 8.4% according to a Reuters poll of leading economists.

Beijing’s or the ability of the government to apply strict virus curbs allowed China to contain the outbreak better than most countries around the world, while the government led stimulus plus encouraging manufacturers to step up production to supply goods which could not do so while they other countries shut down their economies.

GDP expanded 6.5% in the 4th quarter according to data from the National Bureau of Statistics. The statistics indicate China’s consumption lagged expectations, but exports grew more than expected.

Retail sales fell by 3.9%, but industrial output grew by 7.3%.

China is on its 14th 5 year plan, but it does have concerns. In all likelihood tensions between Washington and Beijing will ease, there are rising labor costs, an aging population, and much debt.

The Chinese central bank is expected to keep interest rates low for the coming months.

Linking to dividend paying stocks, most companies with overseas operations depend on China for revenues and logistics or the supply system. China may be a country some Americans do not like but it is an economic powerhouse not to be taken lightly. As China continues to grow commodity prices will hold up in value and there will be many stable prices on the stock market. China is not the most important aspect of a companies business, but it is one to pay attention to.

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

It used to be when you looked at your vehicle you would think about the parts – it needs steel, rubber, or relatively basic commodities to operate. Now when you access the newer vehicles on the road they increasing dependent on electronics to operate. The auto mobile companies in their planning of logistics never thought their biggest problem would be demand for PlayStations.

In an article by Jack Ewing and Don Clark of the New York Times News Service, strong demand for gaming stations, personal computers and other electronics has caused a shortage of semi-conductor chips for car makers. All the large car companies – Toyota, Fiat Chrysler, VW, Ford and GM have announced plant closures because of the shortage of semi-conductor chips.

When COVID-19 hit, auto companies slashed orders for chips expecting demand to down and this was good for the semi-conductor companies – demand for laptop computers, webcams, tablets and 5G smartphones went up. When people started working from home, companies had to upgrade their systems fueling more demand for semi-conductor chips.

The good news for the auto companies is sales came back faster than expected, the bad news is it takes semi-conductor chip companies 6 to 9 months to realign production. New cars have about 100 chips per car.

Companies which supply chips include: Infineon Technologies, NXP Semi-conductors NV, Renesas Electronics. The simpler 8 inch chip has been replaced by the 12 inch chip in the most modern plants. It is easier to ramp up production in the 12 inch chip than the 8 inch according to Syed Alam, global leader for Accenture’s global semi-conductor consulting practice. It takes 20 to 25 weeks from the time new orders are placed for chips to be produced and work through the supple chain to reach cars.

Linking to dividend paying stocks, we are all depended on one another in ways which many of us never realized. If something happens to the supply chain, then it has a ripple affect which even under the best expectations and planning does not work out. In your investments, do you have a understanding of the supply system for your companies?

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

Former President Trump had said he did not lose and went on a spree for months saying I did not lose I won. Since the vote was not in my favor it must have been rigged. The former President kept up with his public statements for months and it was repeated by those who were influenced by him. President Trump had the ability through social media to convince his supporters to support his preferred candidate in the primary or to determine who the Republican nominee would be. Without his social media platform it was going to be a debatable subject. All those Republicans who believed they need former President Trump’s help went along with his conspiracy theory ideas. The result was a high profile event more symbolical than anything else, the President led a charge to the Capital Building and people rioted. The politicians got out before they could be caught and protesters did damage to the building and some lives were lost. The symbolic event at the Capital Building has consequences.

Former President Trump was touted as a great marketer or branding particular his name, after the Capital Building his brand has been diminished. Companies paid for golf memberships and hotel runs and gave money to the Republican Party candidates have stopped or said they will not renew.

In an article by Tom Sims of Reuters, senior management of German Bank Deutsche Bank said they will no longer do business in the future with former President Trump or his companies. Deutsche Bank has $340 million in loans outstanding with the Trump Organization and some of these loans are personally guarantee by Mr. Trump.

The President set a record golfing for 315 days, primarily at Trump Golf Courses and the PGA which held tournaments at 2 of his courses are changing the venues of the event.

Linking to dividend paying stocks, for everyone and every organization there are consequences to actions, although no one knows where the line will be drawn. People feel they know where the line should be drawn, but where and when the public will let you know. It is fitting for President Trump whose line was kept being changed, it was just before his Presidency ended. In your investments, do you know where you would draw the line if the company did something you disagreed with?

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

2021 if the vaccination is successful, which would be a very good thing, the next step will be to raise interest rates and begin to pay down debt. During the pandemic, governments close down many venues where people meet and gather which caused massive disruptions to employment. To counterbalance the effects was to send people and businesses money, as the vaccinations reach a level where there can be concerts and people in stadiums safely, the big concern among policy makers will be inflation.

In an article by Saikat Chatterjee of Reuters, President Biden proposed an increase spending to people, businesses and states as a hopefully final bridge. This spending means more government spending and eventually inflation will rear its head, although do not expect high rates in 2021, but rates for the US Treasury yields are above 1.1%, a 9 month high.

The fed may or may not start tapering a $120 billion a month asset purchase program paving the way for more than a 1/4 interest rate in 2023. Although Janet Yellen has signaled she does also wants to do something about income disparities.

Eurodollars futures maturing in 2023, now expect as much as 40 basis points in cumulative rate increases. The futures are a bet on the direction of the short term London interbank offered rate (Libor), one of the most widely used interest rate benchmarks in global financial markets. Investors hedge interest rate risk in the Eurodollar market.

Morgan Stanley expect tapering by the fed to begin in January 2022 with the fed buying government debt by $10 billion less and buying $5 billion less mortgaged back debt a month with an aim to stop in 2023.

Linking to dividend paying stocks, inflation may be of concern, but in a K shaped economy many people have not seen a rebound in their jobs or income, President Biden is concentrating on them. When we see a more fully shaped rebound, then we can worry about inflation and whether it is best to be in dividend yields or interest rate yields. For the next year, the concern will primarily be analysts and academics.

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

Within every market is the biggest customer and when they buy, volumes go up. When volumes go up everyone on the outside looking in seems to think things are going well. For the insiders in that industry, they worry the biggest buyer may or may not continue to be the biggest buyer. In the case of commodities, the biggest buyer in the marketplace is China.

In an article by Clyde Russell of Reuters, in 2020, China bought record volumes of crude oil, copper, iron ore, and coal or the biggest mining companies depend on China.

In the oil market, crude imports rose 7.3% in 2020 to 10.85 million barrels a day about 12% of global demand. In December, crude imports decreased to 9.06 million barrels a day which is 17.9% decrease or a decrease of 15% from 2019. Did China need the oil or were they stock piling or putting the oil in storage? China does have refining capacity and will refine some oil to ship elsewhere in the Asia.

Copper imports in December were 512,332 tons down 8.7% in November and it was the 3rd consecutive monthly decline. Last January prices reached a high of $8,234 a ton and have decreased to $8,009 a ton. China accounts for half of global copper demand.

Iron ore is another major commodity where China dominates, accounting for 2/3’s of the seaborne market. In 2020 imports rose 9.5% to 1.17 billion tons. Iron ore is used in the manufacture of steel and steed demand was strong as China spent money on infrastructure and construction projects to renew growth (expect the US to do something similar under the new President). In December imports were 96.75 million tons down 1.4% from November.

Coal imports leaped 235% to 39.08 million tons from November’s 11.67 million tons. The total coal imports for the year was 303.99 million tons up 1.5% from 2019.

Linking to dividend paying stocks, in our economy most of us have little to do with basic commodities because we work with information, but the economy runs on commodities. In countries around the world the demand for commodities by China means the mining, railroads and ports were active which means jobs. Politicians like that which means they will have a love hate relationship with China. In your investments, there is company or country which dominates, as long as you are good with it, then there is no reason to seek alternatives, just be aware of it.

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

On January 6, people gathered for a demonstration in Washington and then advanced to the Capital Building and caused damage. There was fallout because of the building they went into – the building which houses the House of Representatives and Congress. Naturally there were consequences, and one of the many was Shopify terminated US President Donald Trump’s official web stores from using its platform.

In a column by Josh O’Kane, Shopify removed the Tump 2020 re-election campaign apparel and merchandise store and the one affiliated with his private business that sells everything from USB sticks to cocoa mix branded with his name.

Shopify, Twitter, Facebook and other companies stopped the message from President Trump because violence against the Capital Building has consequences. It also showed how quickly we have become dependent on such sites and how quickly they can come down.

Millions of retail companies have an on line presence and they use a third party because it is relatively easy to get started and do business. What most do not realize is when can the third party take down their business. What does the business do?

Linking to dividend paying stocks, all companies use other companies to help run their business. Most companies do not do everything in house, they pay others. Most of the time it works well, sometimes it does not. We saw a company called SolarWinds hacked through a company called JetBrains which helped run the software of SolarWinds. JetBrains has business with multiple companies. It is important to remember companies are only strong as their weakest link and all companies have a weak link somewhere.

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

For years we heard the most important consideration for a company was either access to China or the competition from China. If a company had access to China, its revenues would rise because of the large market which is China and its billion people. If competition from China was coming into your product or services, watch out because revenues could fall as they had lower prices. If you think about your smartphone and some of the many things it can do and does do, the makers of the technology are in China and Taiwan and Japan. In the technology world, 5G is coming or is here and you will have to update to take advantage.

Anything from China, there are reports and some are likely true that some of the information from Chinese technology products the information goes back to China to do something. We know in China that the state monitors its people, think the book 1984, some of that goes on today. The biggest smartphone maker in the world is a Chinese company called Huawei. It is highly likely they are the biggest because they have government support or co-operatives with the government.

Huawei also makes the components for the 5G system to work and governments around the world are not quite positive if Huawei should be the supplier or not. A number of European companies have gone with the competition of Huawei and the US imposed sanctions on access to semi-conductors.

In an article by David Kirton of Reuters, the US has banned US firms from selling essential US technology. In August, the ban was extended to foreign firms with US business, reaching chief suppliers such as Taiwan Semiconductor Manufacturing Co (TSMC). Among TSMC’s clients is Apple.

The ban on TSMC hurts Huawei because they use advanced chips for its handsets, 5G network base stations, servers, cloud computing and artificial intelligence products said Paul Triolo, head of global tech policy at Eurasia Group. Stockpiles only last so long.

Dan Wang, said Huawei will feel the impact most acutely in its consumer business which brought in 54% of its revenue in 2019.

In November, Huawei spun off budget smartphone line Honor in a sale which allows the brand to regain access to chips. The company may do the same for its premium brands.

Does President Biden’s policies on China?

Jefferies analyst Edison Lee said the company has enough chips to make about 500,000 5G base stations.

Linking to dividend paying stocks, analysts at various investment houses examine the strategy of every dividend paying company. If a company falls into disagree with a government around the world, some of them can take actions. A government has to have a tremendous amount of clout to stop sales of foreign companies doing business with US and China, one wonders what considerations were given to companies such as TSMC to pick one over the other. In any case, in a world where companies operate across many borders, they are prone to “chosen” by a government somewhere and need lobbyists to watch over their products and services. Ideally a dividend paying company has the ability to have retainers to help them.

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

Stocks that have moats have a built in advantage and just by owning them, as an investor you are protected from downside of the marketplace. If you own a few of the stocks that is good, if you do not part of your homework is to find similar stocks and own them.

Phil Dabo at Morningstar Research examined stocks that have moats from the Russell 1000 ( whatever company you invest through should have similar type of information).

Mr. Dabo used the following criteria for his list:

stocks with wide moats (Morningstar criteria – a wide moat company has a sustainable competitve advantage that enables it to keep competitors at bay for an extended period of time. The theory being they should be able to earn excess profits in perfectly competitive markets)

strong quarterly earnings momentum ( a measure of profitability)

high Morningstar Quantitative Financial Health Score – based on the company’s leverage

stocks with market capitalization of greater than $3.8 billion

Company Mkt Cap Wide Moat Fin’l Qtly Earns Qtly CF Divid 12M Price Recent

$ Bil Score Health Mo % Mo % Yld % Chg % Price

Johnson & Johnson 414.309 5 3 1.0 17.6 2.6 7.9 157.38

Graco 12.121 5 3 8.3 8.5 1.0 39.1 72.35

P&G 345.012 5 3 5.1 8.8 2.3 11.4 139.14

Microsoft 1,681.605 5 3 7.7 5.5 1.0 41.0 222.42

Expeditors Intl Wash 16.098 5 3 5.7 6.2 1.1 21.9 95.11

Costco Wholesale 166.896 5 3 5.8 5.8 0.7 28.2 376.78

Alphabet 1,104.579 5 3 4.5 5.0 n/a 31.0 1,751.88

Landstar System 5.168 5 3 5.8 2.6 0.6 18.3 134.66

Agilent Tech 36.358 5 3 2.8 4.6 0.7 38.9 118.49

Colgate-Palmolive 73.296 5 3 2.7 3.6 2.1 24.2 85.51

Linking to dividend paying stocks, on the list you can see some companies which likely you use the products. If you do that is a great place to start, if you use it why do others also use it. As long as you are a buyer you can determine if the quality and price keeps you coming back. The ideal in buying a dividend company is a monopoly or monopoly like conditions which allows for profitability to continue on a yearly basis. To do that the company has to continually execute well and that is part of your homework.

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

President Trump had a policy that any federal land which has minerals including oil should be opened up for drilling. The policy had favor among the western states but it also included Alaska. The Trump administration would take a look at millions of acres in Alaska and consider it would allow drilling on some of them, why leave them fallow?

In an article by Nichola Groom and Yereth Rosen of Reuters, the Trump administration opened up the sale of drilling leases in a pristine Arctic wildlife refuge, it is highly suspected there is oil there, but found few takers. The sale generated $14.4 million in high bids, a marked difference than in 2018 where bids brought in $1.8 billion.

The new Biden administration has pledged to protect the area and ban new oil and gas leasing on federal lands. JPMorgan Chase has said they would not raise money for the Arctic Refuge Area.

The winners on the tracts of land were the Alaska Industrial Development and Export Authority which won 9 tracts and 2 relatively small companies – Knik Arm Services and Regenerate Alaska won 2 tracts.

The Interior Department had pushed the sale for months, the big oil companies did not bid and in all likelihood the tracts will not be developed. The American Petroleum Institute cited weaker oil demand and changing federal policies. Note if you are in the drilling of oil and gas, you are not looking at this year’s forecast – it is 3 to 5 years down the road. (the drilling would happen, a commercial discovery would have to found and then the infrastructure to move the oil to the pipeline would have to be put into place, at of that takes time).

Linking to dividend paying stocks, all companies are connected to events in the world. Over the past decade we have seen the planet grow warmer or Climate Change, some of that is connected to the oil and gas industry. The risk reward model also includes the public attitudes and whether a company wants to hunker down and do what it does or attempt to work with the public opinion. No public company works in a vacuum, and eventually the public buys your product or service.

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