If you are similar to most people living in North America or Europe, you will hear news about China but not really know the details, because wherever you live that is the area of the world where you will be focused on. First it is where you sleep, then where you work, then the local community, the regional community and wherever your friends and relatives live. In order to have a connection to another part of the world, you need some sort of personal connection. This is why books are valuable, you can develop an understanding and then go back to your regular world.

One of the summer readings was a book called Asian Waters by Humprhrey Hawksley published by The Overlook Press, NY, 2018. Although the book is a few years old, the issues it covers have not changed much for the book is about the struggle over the South China Sea and the strategy of Chinese expansion.

If you go back to the spice trade from Asia to Europe, for generations it was done by land routes or camel caravans and boats from the Mediterranean Sea. If you ever read Shakespeare the Merchant of Venice, the merchants lived in Venice, Italy and controlled the spice trade on the Mediterranean. It was not till people looked beyond the Mediterranean and a ship went exploring and brought back spices to Europe. The trip would take a year or two, but it turned out if the ship came back the profits were very healthy. First the Portuguese dominated the trade but soon the Netherlands or the Dutch, the Spanish and English were sending ships to the spice islands and taking a country for their own or colonization. When profits are healthy as long as the major partners are making money, there is relative peace. When someone wants a bigger share, then conflicts happen.

If you jump to 1842, England had the most powerful navy in the world which allowed the British Commonwealth to be the biggest group in the world. When the price of spices went down, alternatives needed to be found. It turned out that India grew opium and it was the drug of choice for Chinese. The East India Company whose shareholders included royalty, shifted from spices to drugs and profits flowed to London. If you think about the war on drugs between the US and Columbia (cocaine), you have an idea of the tensions between China and Britian.

England had a more powerful navy and weapons of mass destruction; wars were fought and a couple were called the Opium Wars which England won. One of the many concessions was the drug trade continued. At the same time, the government in China was on the downhill, relative to before 1492 when China was the leading country in the world, however the emperor turned inwards and let someone rule the world.

China’s leaders want to get back to the period of dominance and at the moment it is the world’s second largest economy. There are multiple ways they are doing this including what is now as the Belt and Road linkages. Similar to all countries, they like to have options, if the primary route is under threat, there are many secondary routes to link into the country. China has the money to do that and they have gone to many countries offered them infrastructure, as well as a military presence for their navy.

Back to the book, the east coast of China is on the South China Sea and to protect itself and ensure its dominance, China has been taking over islands, adding to their land and installing military installations on the land. Some of the islands are outside the 200-mile limit, but China is the elephant in the room, who can stand up to them?

Linking to dividend paying stocks, the companies are often the biggest players in terms of market share and profitability which allows the companies to raise prices as costs go up and to maintain margins. From an economic standpoint, as investors you like that, which is why often times evaluating the world from an economic viewpoint means it is slightly easier to understand.

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

When gold was discovered in California in 1848, it set off a rush to get to the state, but the only options were travelling by ship or wagon trains. It was not until 1869, the East and West coasts were linked by railway. Over the years through various consolidations and agreements, no single entity has controlled that coast to coast passage.

In an article by Josh Funk of the Associated Press, Union Pacific and Norfolk Southern Corp in a $85 billion deal want to change that. UP owns vast rail network in the west and NS is concentrated on the East Coast. UP is offering $20 billion in cash and one share of UP or $88.82 and a share which values NS at $320 a share.

Any deal would be closely scrutinized by antitrust regulators who had set a high bar after previous consolidations led to massive backups and snarled traffic. If the deal is approved, there would be pressure on BNSF and CSX to merge. BNSF has the ability to buy CSX.

The regulators of railways is called the US Surface Transportation Board and in the hearings, the big shippers have a say, but they all want something a little different. The chemical plants in the Gulf fear a monopoly or higher prices. Other big shippers such as Amazon and UPS might be in favor if the packages arrive more quickly and reliably.

The deal if approved will take 2 years of planning for a smooth integration or they are looking for 2027 approval.

In the early 1980’s there was 30 major freight companies, now there are 6 companies.

Linking to dividend paying stocks, one of the reasons for owning a railway is they are not making any railroads anymore. The size and shape of the country means the cost of using railroads over trucks will always exist, which means big shippers need the railways. As long as the economy is moving, the railroads will make a profit and pay dividends. The issue is how much of a profit.

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

If you are reasonably normal person, most of the time you focus on what is around you, where you live and work, then where close friends and family live and finally everywhere else until you visit there. There are very good reasons to do this, but we live in a global environment so information about other countries is a good thing to know.

In an article by Lydia Depillis and Bhadra Sharma of the New York Times News Service, beside China is a country of 3 million known as Nepal. If you know anything about Nepal, you will likely know the highest mountain in the world is located in Nepal. If you have mountains, that should there should be hydro electric power and likely is relatively inexpensive because the water comes down the mountains.

Similar to most countries, Nepal had many vehicles with internal combustion engines, that has been changing. 5 years ago, there was almost no electric vehicles or EVs. This past year, 76% of all passenger vehicles sold were EVs, and the light commercial vehicles were EVs.

The swift turnover is Nepal’s wealth of hydropower and China’s EV companies had a push to sell vehicles into Nepal. The process was also helped by government subsidies to buy EVs.

The Asian Development Bank has been a key financier of Nepal’s dams, transmission lines and charging networks.

The cost of a Hyundai SUV is $38,000 and the gas-powered model is $40,000.

The Nepal Electricity Association built 62 charging systems in the capital Kathmandu. It also allowed anyone to build chargers, businesses have added 1,200. The government set electricity costs for chargers at less than market rates. At those prices, fueling a gas power tank costs 15 times as charging an electric one.

There is no perfect method as the gas-powered auto dealers worry Nepal does not have a plan for collection or recycling of batteries. The smaller Chinese car companies might be faulty; there should be more regulation to independently certify safety and quality.

Linking to dividend paying stocks, if the government wants to change habits, people vote with their pocketbook. It is the same in investing, if there is a better way, new technology which is adopted then people begin to adjust to the different method. It is a tried and true method which no matter the industry, people vote with their pocketbook to find alternatives.

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

In the midst of summer, people gather and often think about the past including the foods they ate. When they talk about the food they will often say a brand name which everyone refers to as the food group, for example Cool Whip for a topping on pies. For the food companies when this happens, it tends to mean steady income streams leading to profits for decades.

In an article by Julie Creswell and Lauren Hirsch of the New York Times News Service, it recent years something is changing as consumers are changing. People are still eating and spending, but they have either cut back on the brand names or trading down to the less expensive private labels. Others have gone to what they consider healthier among the many stressors.

As growth in the packaged food industry stalls, its stocks have lagged. While the broad S&P 500 index is up 40% over the past 2 years, the packaged food industry stocks have flatlined.

If there is no growth, what can food packaged companies do? re-engineer themselves. Italian candy company Ferrero is buying WK Kellogg for $3.1 billion. Kraft Heinz a $26 billion company is considering breaking up into smaller companies.

Kelly Haws, a professor of marketing at Vanderbilt University, said the big brands are going to have to really fight hard to figure out how to stay relevant. The value of some of the brands has decreased dramatically and they may have to reinvent themselves.

An example is Kraft, in 2012 it spun out its snack business and called it Mondelez. In 2015, Kraft merged with Heinz to become the 3rd largest food country in the US. A decade later, the stock has lost 60 % of its value and the last 3 years revenue has been falling. The company had many things going for it, legendary investor Warren Buffett owned it, they brought in Brazil’s 3G who were very good at cost cutting. At the end of the decade, 3G sold its holdings and no longer has a board seat and they have their 3rd CEO Carlos Abrams-Rivera. The focus is now on new products for the changing consumer preferences.

Linking to dividend paying stocks, while we all do generic things such as eat, where and how we spend our money changes over time. What was once a license to print money, is a bit harder now and as everyday consumers you can see these things. If you invest in packaged good companies, are you buying the same amount? when you look at what others are buying, is it consistent or are they changing? If you are changing, then you can do your homework to see if others are changing and perhaps that investment will need to seek alternatives.

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

For very good reasons, government imposes regulations on industry and similar to everyone who deals with regulations – sometimes it is a pain, sometimes it is understandable. Every government says we want some regulations but there is a difference in opinion on how much should the government impose? When the regulations hurt your competition, companies believe the regulations are good, when it affects them not so much.

In an article by Dawn Chmieleski and David Shepardson of Reuters, reported the Federal Communications Commission (FCC) approved the merger between Paramount Global and Skydance Media. The deal is for $8.4 billion includes prominent names in entertainment, including the CBS broadcast TV network, Paramount Pictures and the Nickelodeon cable channel.

The FCC agreed to transfer broadcast licenses for 28-owned-and-operated CBS TV stations to the new owners. The FCC waited till SkyDance paid US President Trump $16 million over a 60 minutes interview.

The FCC chair Brendan Carr said the agency’s review of the proposed merger was not connected to the civil service or it is coincidental of the timing. However, Mr. Carr welcomed Skydance’s commitment to eliminate invidious forms of DEI discrimination.

Skydance CEO David Ellison is poised to become Chairman and CEO of the new Paramount. Jeff Shell, former CEO of Comcast’s NBCUniversal is to become President. If the Ellison name is newsworthy, if you connected it to Larry Ellison of Oracle Corporation, he provided some of the financing for the deal. David Ellison says he will have a studio in the cloud or a fully digital cloud-based production. The company will be using AI to generate content faster and cheaper.

Linking to dividend paying stocks, in deal such as this, Paramount has some great assets but has not performed well and needed an overhaul. Skydance expects to use technology and cost cutting to turn the company around, but did it really need to cut DEI and settle a lawsuit with the President before it received approval? The FCC is supposed to be relatively independent of the Presidency but is that the case? Skydance executives made a decision that everything was connected, and they had to march to the drummer. Sometimes, life falls into the grey area.

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

In geopolitics, countries form partnerships and then countries do their own thing. Often times following economics or follow the mtoney is a key to understanding what will happen in the future. China and Russia border each other and trade happens between their countries.

In an article by Keith Bradsher of the New York Times News Service, trade between the 2 countries exceeded $240 billion in 2024, up 2/3’s since Russia invaded Ukraine in February 2022. China is the biggest buyer of Russian oil, timber, coal and natural gas.

Much of the trade flows through Manzhouli, China, the main border crossing between Russia and China. The trade means trainloads of Siberian lumber, truckloads of Russian canola and oil and natural gas pipelines run through the city. Manzhouli is located beside Mongolia and north of Beijing, in China it is one of the smaller cities of 250,000 people.

The flow underscores Russia’s diminished economic position. It is now functionally an economic satellite of China, dependent on Beijing for manufactured goods while selling raw materials that China could, if it wanted to, buy elsewhere.

Almost 6% of the entire Russian economy now consists of exports to China. Russia depends on China for clothing, electronics, cars. China’s northbound exports have risen 71% since the start of the Ukraine war.

China produces 32% of the world’s manufactured goods. Russia’s share of global manufacturing is 1.33%.

China used to buy more raw materials from other countries but has cut back, finding alternatives is for any consumer – both individual and country.

The biggest stress in the trade relationship involves cars. Back in 2021, Chinese cars were not very popular in Russia. But after the invasion of Ukraine, Western automakers withdrew from the country, Chinese automakers slashed prices and now have 60% of the market according to GlobalData Automobile, a research firm.

Linking to dividend paying stocks, alternatives is the key and people always have some sort of choice, why they keep with the company is the question the investor has to ask. Every industry has some alternative, most make little sense until technology and time changes the economic equation, then people move that way. What are the alternatives for your investments?

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

If you think about luxury items, the biggest company in the world is LVMH headquarter in Paris, France. In theory, as long as a luxury brands continues to stand for all the things that make it a luxury, adding a price increase should be relatively easy.

In an article by Tassilo Hummel and Mimosa Spencer of Reuters, LVMH CEO Bernard Arnault plans to open a second factory in Texas, while the luxury group is anticipating a good outcome between talks between Europe and the US (it came in at 15%). The second factory is expected to open by 2027, the first plant also in Texas was opened in 2019.

The company reported lower-than-expected quarterly sales with its core fashion and leather division losing further ground as the group struggles to shake off consumer fatigue.

One of the key markets for luxury goods is China, LVMH opened a new store in Shanghai in the shape of ship (interesting architecture design) and sales have been good.

After years of aggressive price hikes, LVMH billion-dollar legacy brands are facing increasingly stiff competition from more affordable mass-market brands such as Coach and Ralph Lauren as well as innovative smaller labels such as Prada’s Miu Miu.

LVMH sales for the second quarter to the end of June were $31.28 billion falling short of a consensus forecast for a 3% decline. Sales at the group’s fashion and leather division, accounting for the bulk of the profits, were down 9%, below expectations for a 6% drop.

Linking to dividend paying stocks, every industry has to protect its margins and even though it seems some industries have it easier than others, they have their ups and downs. With luxury brands, the companies have to maintain the image and the reasons why the brands are luxury so people are both repeat customers and aspirational for new customers. As an investor, the simple question is do you like the brand? If not, find alternatives.

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

We all know the baby boom generation is getting older and when an individual gets older the body does not heal as fast as when it was younger. To help with healing drugs are used, those prescription drugs can be billion dollar sellers which makes pharma companies potentially attractive as a stock holding.

In an article by Danilo Masoni of Reuters, global health care stocks have not been this cheap in decades, which incites the fund companies to begin to buy, but the shares have not jump, highlighting the uncertainty over drug pricing policies since President Trump returned to the White House.

Global pharma companies’ earnings outlooks is being obscured by concerns over revived most-favored-nation drug pricing rules in the lucrative US market and potential 200% tariffs on pharma imports into the US.

During COVID 19 years, money flowed into pharma stocks, but since then the sector is cheap and unloved.

At 15.9 times forward earnings, health care trades 11% below its long-term average and 20% below global equities, its steepest discount in 16 years.

Stephanie Aliaga, global market strategist at JPMorgan Asset Management in New York, said there is a good reason for the discount, US policy risks.

On the positive side, innovation is accelerating, pipelines are maturing and M&A is showing signs of picking up- yet stock prices are unmoved.

Is this a value trap or buying opportunity?

Historically, health care has traded at a modest premium to world stocks, thanks to its defensive profile and steady earnings.

Eddie Yoon, health care sector leader and portfolio manager at Fidelity in Boston, said Being cheap is not necessarily a reason to buy. You need a catalyst.

Linking to dividend paying stocks, what is the catalyst? sometimes the catalyst is the dividend yield, a profitable stock at a lower price paying a dividend and because the stock price is low, the yield goes up. At some point, the price should go up, but in the meantime getting a good yield is a wonderful thing.

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

When you invest in stocks, part of how the stock will perform is based on expectations. The company offers guidance or what it should do and then reports on how well it did or actuals. If it did better than expected, the market says YEA! and the price tends to go up, if it did not then the price tends to go down as allocation happens – shifting from one stock to another.

In a report from Mattel, the large toymaker which has it headquarters and design staff in the US but essentially makes most of its toys in China. It is a bell weather stock on President Trump’s tariffs. How does the company adjust to tariffs? Do it bring manufacturing to the US? Mattel sells to the giant retailers, what are they doing about tariffs?

Mattel reported weak Barbie sales in North America (President Trump said a girl can have 3 or 4 dolls not 30) and cautious inventory planning by retailers amid global trade uncertainties weighed on demand.

Mattle expects a 1% growth rather than a 2-3% growth. It is still making profits, just less, its prior estimate was $1.66 to $1.72 but changed the estimate to $1.54 to $1.66.

Mattel’s finance chief Paul Ruh said retailers such as Walmart, Target and Amazon were limiting building up inventory going into the key holiday season to minimize exposure to higher tariff rates.

Mattel had fewer new product launches for Barbie and worldwide gross bills for dolls fell 19%, while the infant, toddler and preschool category dropped 25%.

Mattle had net sales of $1.02 billion for the quarter just less than the $1.05 billion which was expected.

Linking to dividend paying stocks, sometimes companies can do everything right from their perspective and still not perform to expectations, but that is why they have plans to do something which they can control. As an investor, you have to determine if what the company’s plans are is something you want to be on the ride with them. Sometimes the answer is yes, sometimes it is no for it depends on the company.

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