During COVID, one of the big winners on the stock exchanges has been the tech sector. For a wide variety of reasons, the tech sector influence in the economy has increased and equally important profits soared. In the US exchanges owning directly or indirectly the FANG stocks has increased your portfolio. However with the greater influence, all governments have started to ask are the tech sector too important? too unregulated? can we control it? The solution in the US is different than the solution in China.

In an article by Joe McDonald of the Associated Press offers insight into how China is trying to controlled its tech sector. China has the world’s biggest population of internet users at 940 million, according to government data. An unusually large share of the public use e-commerce and other online services, giving internet companies outsized influence in retailing, entertainment and other industries. If you think back a number of years, the US had a phone line in almost every home, then a cable and then the internet. China and other countries went straight to the internet and smartphones.

In China the biggest internet companies are Alibaba, JD.com and Tencent, with Alibaba as number one company. Alibaba’s revenue rose 30% in the 3 months ending in September to $23.4 billion. In November, Alibaba has the single’s day festival from Nov 1 to 11 and spending rose to $75.1 billion.

In China, the ruling party can clip any wings it wishes or wants to. The ruling party says anti-monopoly enforcement in tech industries will be a priority. What does that mean, according to Francis Lun, chief executive of Geo Securities in Hong Kong, the era of free growth and ultrahigh growth is over. The government will decide what you can do.

Alibaba was set up in 1999 and operates in retail, business to business, consumer to consumer and has expanded into financial services, film production and other fields. Its founder Jack Ma has a fortune estimated at $59 billion. Alibaba owns Ant financial services and it competes against state owned banks for business, squeezing their profits. The state owned banks feel theaten and have the government supporting them.

Linking to dividend paying stocks, when the established players make money competition is a wonderful thing in theory. When the established players lose money or do not make as much, competition is not a good thing. When you invest and the companies are making profits, the process is less important until they make less. Process matters all the time, particularly for governments. If the companies you invest have good governance, then they will be able to whether the cycles in the market.

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

In every portfolio there will be stocks that have done well and stocks that have not, as the economy is never even. If you own oil stocks which for years was a very good thing to own, your portfolio was down. However there are some stocks which have been consistent over the past year in making profits and paying dividends.

Michael Pe of product manager for CPMS at Morningstar Research examined the S&P 500 index to find the consistent profitable companies.

His criteria was:

a consistent dividend growth – annual dividend growth every year for the past 5 years

a low dividend-to-earnings payout ratio – dividend payout ratio of less than 70%

a high Morningstar quantitative health score (the company he works for) – at least 70 out of 100

dividend yield of at least 1%

Company Mkt Cap Div Grth Payout Quant Health Div 1 Yr Ttl Recent

$ Bil Rate % Ratio% Score % Yld Rtn % Price

Citigroup 122.960 53.2 34.0 76 3.5 -21.9 59.06

Citizens Fin 14.610 42.8 54.2 71 4.6 -11.3 34.21

Charles Schwab 93.552 34.1 30.3 82 1.4 9.3 51.98

Regions Financial 14.656 28.3 42.6 73 4.1 -8.2 15.26

KeyCorp 15.057 24.6 55.0 72 4.8 -20.1 15.42

A.O. Smith 7.535 21.5 44.0 77 1.9 19.6 55.64

Hormel Foods 25.883 11.8 56.0 80 2.0 9.3 47.94

Jack Henry & Assoc 12.335 11.7 45.4 74 1.1 11.8 161.63

Accenture PLC 176.027 10.1 42.8 73 1.3 29.4 266.25

Microsoft 1662.648 9.5 33.0 72 1.0 41.7 218.59

The other companies in the list were: Cicso Systems, Clorox, Church & Dwight, Merck, Tiffany, Expeditors International of Washington, Johnson & Johnson, AmerisourceBergen, C.H. Robinson and Proctor & Gamble

Linking to dividend paying stocks, if you bought the above companies for the dividend, you would still own them. Not all of them went up, the financials tended to have a down year but in 2021 they are expected to be positive as they stayed profitable but concerns were they would have greater write off of loans. In 2021 we all have hope that sectors such as tourism and hospitality can open up which is a good thing. You might own some names such as the ones above and you can ask your investment advisor for research such as the Morningside Research. Buying profitable stocks that can pay dividends is a good strategy.

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

Stocks have done well over the past number of years and there are reasons why they could continue their run. The most important reason is interest rates which Central Bankers around the world have kept low, which means the alternative to bonds is stocks. Another reason is simple simple and demand.

In an article by Sujata Rao of Reuters, investors are competing against companies doing buy backs and central banks trying to ensure the economy keeps running through the pandemic.

Dealogic shows a number of high profile IPOs has raised over $1 trillion in new equity. On the over side of the coin was mergers and private equity deals which took shares off the markets.

The issue with the bond market is the biggest buyer is the Central Bank. At the end of 2020, Central Banks own half the sovereign bonds in Britain, the Euro and Japan.

JPMorgan analyst Nikolaos Panigirtzoglou estimates the net equity demand/supply match next year around $1.1 trillion. He is expecting demand for shares to increase by $600 billion, while supply drops by $500 billion as buybacks and private equity led leveraged buyouts recover.

Buybacks of stock was held lower by federal regulations, which restricted the banks from buying back their stock, however in 2021, the Federal Reserve is allowing US banks to buy back stock and a number have been announced for 2021.

A change for new IPOs is people who use the platform of Robinhood and others have increased their participation from 10% in 2019 to an estimated 40% in 2020 according to estimates from Citadel Securities.

Linking to dividend paying stocks, all things being equal when there is a supply and demand issue, good stocks should continue to do well in 2021. This means if you own a good profitable company you should be able to hold it and the value will likely climb. The alternative of buying bonds at rates about dividend paying companies is low, which means 2021 is looking to be a good year.

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

It is hard not to like Amazon for what it does, it is also hard not to use Amazon or see how the company has been growing and continues to grow over the years. Amazon is now the biggest office user in Seattle, is scheduled to increased its presence in the Washington, DC area and with its large distribution centers is a major employer in many cities. This is good for many people, however if you work in the distribution center you may or may not like working there. In the work of time motion activities, Amazon has it down to a a science.

In an article by Jeffery Dastin and Krystal Hu of Reuters, in 2021, there will be some votes at Amazon facilities to unionize or not. In the past, Amazon has been anti-union, not as bad as Wal-mart, but in that area. (Wal-mart and Amazon are America’s two largest private employers). People have tried to unionize at Amazon, but since 2014 and that result was a no, Amazon has no union.

One would thought the first union would come from a state that is more heavily unionized than others, but the first vote is coming from a fulfillment center in Bessemer, Alabama. At the moment, the average pay at the facility is $15.30 a hour plus health and retirement benefits (the minimum wage in Alabama is $7.25, which means the concern is something more than money). Other efforts to organize a union are in Wauwatosa, Wisconsin and Portland, Oregon.

Linking to dividend paying stocks, many dividend paying stocks have a union, most utilities have a unionized electrical workers. Unions do not mean the company will not make money, but it does mean a change management attitudes towards the lowest worker in the company. Whether a company organizes or not, it does not mean wages would go up because in Amazon’s case they pay greater than minimum wage and President elect Biden is going to working on a $15 minimum wage. Management can easily work with unions and still make profits which translates to dividends.

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

For the past 6 months, if you moved your money or your portfolio was weighed towards stay at home stocks, it did better than the averages, will those stocks remain high flyers or will another sector be the leading sector? We now have hope as more and more people are vaccinated, the economy can recover for people to move around more. Will the downtown office buildings be filled, the highways go back to stop and go traffic? we do not know. Although if you have been driving during the COVID shutdowns, driving is easier. On Wall Street, there is money to made in every sector, so analysts are now suggesting many cyclical stocks will be a leading percentage gainers.

In an article by Caroline Valetkevitch of Reuters she interviewed people such as Tim Ghriskey, chief investment strategist at Inverness Counsel in New York, who said, You are going to see earnings recover, the economy recover and that is on the back of cyclicals and restocking. The market will transition from all growth to more of a balance between tech and cyclicals.

Energy is down for the year 36%, financials are down 8%, information tech up 40%.

Jonathan Golub, chief US equity strategist at Credit Suisse Securities, is overweight financials in 2021, but neutral on cycicals in general.

Goldman Sachs is overweight industrials and materials and neutral on consumer discretionary, financials and energy.

Linking to dividend paying stocks, when you buy a profitable stocks as long as it stays profitable, there is very little reason to move into different sectors, because you are buying the stock for the dividend and not to worry about the price. Over a period of time, profitable stocks trade at higher multiplies and your total return makes you wealthier. If you go into the retail store or mall, they have to change every season to entice you to buy. Wall Street operates on the same theory, they make more money if you buy and sell often, you make more money if you buy profitable companies which pay you dividends and then at some point you can use the dividends to buy growth stocks, in that fashion you have the best of both worlds, but the portfolio is concentrated on dividend stocks. As you review your portfolio in January and if it did what you had expected and it continue, you might not have to do much and that is a good thing.

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

The year has started and we know some things, but we do not know other things. We know a vaccine is available and people are beginning to receive it, although the numbers are a far cry from 50%. If they are over 50%, there is high probability the affects of COVID will decrease rapidly. If and when that happens and if COVID mutations do not affect the general population, tourism and hospitality will open up and increase. As people are able to move around freely, one of the big drivers of the economy is for consumers to shop. Where do they shop? How do they shop? do they go to malls again? Do you feel comfortable going to a mall?

In an article by April Joyner of Reuters, equity investors are asking themselves should I invest in retail stocks? The SPDR S&P Retail ETF which tracks a broad group of retailers is up 40% in 2020, what will it do in 2021?

Congress recently passed a stimulus bill which puts about a trillion dollars in the economy, some of it goes directly to consumers or taxpayers, what will the do with it?

Eric Marshall, portfolio manager of Hodges Capital Management noted JC Penny, J Crew Group, Pier 1 Imports and Neiman Marcus have declared Chapter 11 bankruptcy. This allows the companies to restructure their operations, close stores and keep the best ones open.

On-line shopping has increased, by researching the stores on-line sales and expectations, you have an idea of what to expect in the future. One method is to determine if on-line shopping for you was easy at their sites. What is your expectation for shopping in September?

Alex Ely, chief investment officer of Macquarie Investment Management said the fundamentals are going to be better in the second half of 2021 or 2022, you need to buy 6 to 9 months ahead of time.

Linking to dividend paying stocks, prior to COVID having retailers in your portfolio was a very good thing for there was consistency in the sales and some companies usually did very well. Since COVID retailing has changed, will it go back or are hybirds here to stay. When you examine your shopping habits and then people around you, there will be an indication of what shops to look and which ones to avoid. It will take 2 years before retail stores are consistent again, which means it is better to seek alternatives first before jumping into the retail sector.

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

Macro economics are important because the macro news will determine how the federal reserve and the government enact policies. The jobless number gives an indication of how the economy is doing and the confidence of those that are working. For those that are working, if the unemployment rate is low, they have more choices, even if they do not do anything about it, to move to jobs which they like or think they would like to do. Sometimes the mobility is about money, sometimes it is about management, and there are a host of other factors.

In an article by Lucia Mutikani of Reuters, the early December filings for Americans filing first time claims for jobless numbers unexpectedly rose. President Trump has tried to pretend COVID is not a problem, but the number of cases and the people dying have increased and the only remedy is to shut down the economy. Shutting down the economy is to ensure people have little place to gather or more pain for those in the hospitality and tourist sectors.

The good news was in homebuilding where the numbers continue to rise, primarily people moving from the cities to the suburbs and country, to be in bigger houses and more space around them, if they have jobs which allow they to work from home.

The number of claims increased to 885,000 which is higher that what economists polled by Reuters had forecasted, they were expecting 800,000. (in 2007-09 Great Recession the jobless numbers were 665,000).

The jobless numbers are the reason why Congress had pressure to past a stimulus package and the federal reserve is determined to keep interest rates low.

Linking to dividend paying stocks, as long as interest rates remain low, expect a demand for dividend paying stocks where the yield comparison is higher. With all investments, there is comparison over something else, what is attractive now and for the next 3 months. Hopefully with the COVID vaccine and a new administration in the White House which acknowledges the problems of COVID, the economy can move forward. However do not expect interest rates to move in the next year.

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

All of us are bias when we come to investing and just about everything else in our lives. Depending on how you earn your income, you are likely to look to that sector first. Depending on the products and services you use, you might look to them second. You use them and can keep an eye on them.

During COVID when many people stayed in and around their homes, the number of pets increased. You can look at the companies which provided pet food and if you have a pet, maybe which companies provide the other costs of owning a pet. If you have one, hopefully you have the best cat or dog or whatever you own.

According to the American Pet Association, in 2019Americans spent $95.8 billion on their pets up 5.7% from 2018. During 2020, the number went over $100 billion.

Nielson Co which does data and market measurement shows sales of leashes, collars and dog houses has been growing in double digit numbers. Between April and June they were up 16%, up another 13% in the summer and in the fall they went up 15%.

How can you invest? Adam Mayers of the Wealth Builder invesment newsletter noted 4 companies:

Zoetis based in New Jersey, its stock is up 20% to $161.36, the dividend yield is 0.5% and PE ratio is 46.5%

There are ETFs such as the Harvest Healthcare Leaders Income ETF which holds 20 of the largest global health care companies including Zoetis.

Elanco Animal Health was spun off from Eli Lilly in 2019 and recently purchased Bayer Animal Health for $6.89 billion.

Merck & Co animal health business is a division but it generates $4.4 billion or about 10% of Merck’s reveue.

Linking to dividend paying stocks, often you are drawn to companies with a monopoly or near monopoly or similar to a utility. However, there are many companies to invest in and sometimes the answer has 4 legs and is in your home. In 2021, be open to opportunities, keep the bulk of your investments to something you know are bias in and 2021 will be another good year.

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

When you examine the economy, after you believe your income or job is safe, you look for areas of the economy which need to be doing well and then you are convinced something has changed for the better. One of the major economic drivers in many cities is the airport, both business and passenger traffic. The higher the capacity or volume of people the more the economic activity from the travelers and the well being of the airport. Generations ago, the economic activity went around the railway station, now it is the airport. If the airport you would typically fly from is doing well, then you can easily believe the economy is doing better.

All industries have conferences and in 2020, most were virtual but they were still held. In an article by Nicolas Van Praet the Chief Executive of Airbus Guillaume Faury spoke to the International Economic Forum of the Americas, virtually. His company is the competition to Boeing, he said 2021 is shaping to be a chaotic year for the global aviation industry but he sees hope. The expectation if you compare the end of 2021 to the end of 2020, they will be a much different situation.

In every industry, they like order or predictability to know what to expect, Mr. Faury said an orderly return to air travel for passengers is the priority for Airbus and its customers. In 2020, we have seen a very disorderly process, which countries are open and which ones are not.

At the moment there are no widespread harmonization of the rules, it is patchwork.

For Airbus, 2020 has been a difficult year, it cuts its production rates by 1/3 in April, cut its workforce by 17% and it October it hopes to return to breakeven on a cash flow basis in the last 3 months of 2020.

Airbus’s customers are the world’s airlines and they have not cancelled airplanes just asked to defer them

Two big costs for airlines is fuel and financing, both have been low for the past year which has allowed airline customers to purchase more fuel and cut borrowing costs. Thankfully many governments have offered support to the airlines.

Linking to dividend paying stocks, ever since the Wright Brothers flew the plane, people have been interested in plane travel. With COVID the mixing of people has been a limiting factor which has hurt the airline industry including the 2 big manufacturers – Boeing and Airbus. We all look for something or guideposts to tell us whether an industry is doing well or not. The health of a middle income economy has been the airport, do you have guidelines for your investments?

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