Vatic Note: I believe it.... Americans used their money to spend and consume and thus the owners of the companies that made those products made enormous profits. Also Slave workers are not as productive as workers who believe themselves to simply be workers and not slaves. Americans have always been the most productive workers on the planet, and now the owners of those corporations are beginning to understand that everything is not about the wages, but about productivity. Slaves do whatever they are told with no extra anything in the way of loyalty or commitment to the job. I remember when Hershey chocolates shut down their plant and laid off 9,000 American workers and then opened up a plant in Mexico and hired way more than 9,000. I heard people saying "Then let the people in Mexico buy Hershey's chocolate, and see whether they are glad they moved there." Needless to say there was a drop in their profits, at least from chocolate loving Americans.
Additionally, in China, and other third world countries, they save and do not spend as we did. Further, they refuse to get into debt, so the bankers are not making near the money they used to, so now they are coming back home. We will see. I think America, just like our forefathers, learned some lessons through all of this.... no debt, no foolish spending and reconsideration of what is really important in life. Time with family and friends, or making money to buy things we don't need or even want sometimes. Lets see how we handle this reemerging manufacturing, if its not just election propoganda. This time maybe we save and buy when we have the full amount rather than using debt.
We were also coming up with alternatives to the current system and maybe we would not have purchased anything from companies using overseas labor. I boycotted Sarah Lee and Hanes for using 9 year old children to make their products and those kids would die by the time they were 11. Horrible. Right now in this town, I use bartering my products I make with merchants and that keeps both of us going. Unfortunately winter is bad here in our mountain town. Spring is coming and that should change.
Made in America…Again!
While killing some time at the JFK airport a couple weeks ago, I grabbed a copy of Bloomberg Markets magazine and perused it over breakfast. There was one story that struck me titled “Time to Head Home for Some Manufacturers.” The basic gist is that American manufacturing is more competitive than most people think.
But the manufacturers themselves are starting to notice. And so some of them are opening up new plants in the US or relocating far-flung plants back home. The math is pretty simple. The big lures that sent them abroad — cheap labor and cheap fuel — are no longer so attractive.
As I noted on Feb. 3, the wage gap has shrunk. Wages in China and other overseas markets have gone up a bunch while US wages have stagnated. Cheap fuel has long since expired as a reality. Oil is the big factor and crude oil averaged north of $100 a barrel last year for the first time ever. But natural gas is another lure to come back to the US. In China, for example, natural gas prices are twice what they are here.
There is more: The US dollar has lost a quarter of its purchasing power since 2002 against a basket of 20 major currencies. That makes US assets and talent cheaper compared with similar assets and talent overseas.
The raw costs are only part of the equation. There is the soft stuff to consider as well, things like intellectual property risks and the fragility of supply chains. The Japanese tsunami and floods in Thailand caused major disruptions for manufacturers. And the US itself is still the world’s largest market. Therefore, the thinking goes, it could be better to make things closer to the customers that buy them.
Researchers at Gartner predict that 20% of the goods made in Asia for the US will shift back to the US by 2014. Surveys of manufacturers show many are considering moving operations back to the US.
As we continue to slog our way through second-quarter earnings, we see more companies announcing investment in the US. This is true from the giants like Caterpillar to the smaller players like Carlisle. Carlisle Companies is a small conglomerate that makes tires and insulation and more. CEO Dave Roberts recently wrote: “We find it as cheap to manufacture in the US as in China.”
If you got caught saying something like that in public, even just a couple of years ago, people would’ve written you off as idiotic, blindly patriotic or fit for the madhouse. Maybe all three.
In Manhattan [last month], I attended the Gabelli’s 22nd annual Pump, Vale & Motor Symposium.
There, a dozen industrials trotted out there stories. These were companies with blue collars working in places such as Batavia, N.Y., and Mansfield, Ohio. It was hard to walk away from there thinking the world was going to end. There are a lot of companies doing some pretty cool things. Their backlogs are healthy. And while nearly everyone was cautious about making any kind of robust forecast, it was clear that business was not bad.
Among the various presenters, Flowserve was one of the most red, white and blue. Its last acquisition in 2011 was for Lawrence Pumps, a company based in Massachusetts. Before that, in 2010, Flowserve picked up Valbart, an Italian manufacturer that is now opening a plant in Houston.
Of course, many people still think we don’t make anything in America anymore. I read a great piece in
The Atlantic recently called “Making It in America,” by Adam Davidson. An excerpt:
“We do still make things here, even though many people don’t believe me when I tell them that. Depending on which stats you believe, the United States is either the No. 1 or No. 2 manufacturer in the world (China may have surpassed us in the past year or two). Whatever the country’s current rank, its manufacturing output continues to grow strongly; in the past decade alone, output from American factories, adjusted for inflation, has risen by a third.”
What trips people up is the shedding of manufacturing jobs. Just in the 10 years ending in 2009, the US shed more manufacturing jobs than it gained in the previous 70 years.
About one in three such jobs disappeared. Davidson continues:
“Is there a crisis in manufacturing in America? Looking just at the dollar value of manufacturing output, the answer seems to be an emphatic no. Domestic manufacturers make and sell more goods than ever before. Their success has been grounded in incredible increases in productivity, which is a positive way of saying that factories produce more with fewer workers.”
Still, there is a human dimension to all of this — those lost jobs and the people involved today whose jobs are hardly secure. I highly recommend Davidson’s piece if you want to get a better understanding of what’s going on.
As an investor, though, clearly, it pays to shed the old ideas that the US is not competitive as a manufacturer and that we don’t make anything here anymore. Neither is true. And that insight can make you some money.
Regards,
Chris Mayer
for The Daily Reckoning
Read more: Made in America...Again! http://dailyreckoning.com/made-in-america-again/#ixzz1qCTdnOeH
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1 comment:
That's great news. I can add a thing or two to it.
For one thing, China is still a nation run by the whims of men rather than by laws. Lots of Taiwanese investors in China have lost their shirts after the Chinese reneged on a contract. In China, a contract is valid only as long as both parties say it's valid. If you're a foreigner, you're even more disadvantaged if you have any hopes of recourse. If you think the Great Wall of China is great, the cultural wall around China is greater.
Many manufacturers follow the "U" curve formula. Higher profits are at research and development at one end; and advertising, branding, and marketing at the other end. The manufacturing (in the middle)is outsourced. One large Taiwanese business does all three areas in Taiwan so as to avoid a disconnect between the two ends of the profit curve. It's smart and profitable.
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