Tue. May. 26, 2009

News of the U.S.’s Demise May Be Premature *

Quick, who is the world’s largest exporter? China? Japan? Would you be shocked to learn it is the U.S.? Contrary to the “Made in China” stamps on clothing labels in Wal-Mart (WMT) and on the bottom of McDonald’s (MCD) Happy Meal toys, the U.S. still leads the world in exports. To be a successful investor, we must keep things in perspective.

Despite what the mainstream media would lead you to believe, the U.S. manufacturing sector has not slipped behind all other industrialized nations in the world. Michael Brush in a recent MSN article points out that the U.S. is still far and away the largest manufacturer in the world.  Below are some interesting highlights from the article:

  • U.S. workers produce 21% of all factory goods made globally, or about $1.7 trillion worth per year
  • China is the second-biggest global producer, but doesn’t even come close at 13%
  • During the previous economic boom, manufacturing contributed more to U.S. growth than any other sector
  • States with the most factory jobs are California, Texas and New York
  • Big export categories ($1.3 trillion last year) are heavy-construction equipment, turbines, locomotives, nuclear reactors, aircraft and aerospace equipment.

According to the U.S. Department of Commerce, the largest export markets for U.S. goods in 2008 (with percent increase over 2007) were Canada ($261.4 billion, up 5.0%), Mexico ($151.5 billion, up 11.4%), China ($71.5 billion, up 9.5%), Japan ($66.6 billion, up 6.2%), and Germany ($54.7 billion, up 10.2%). Consider these three prominent U.S. manufacturers:

Boeing (BA) – Yield: 3.77%
BA is the U.S.’s largest exporter, largest aircraft producer in the world and the second-largest aerospace and defense contractor. The company produces civilian planes, military jets, helicopters, missiles, satellites and other aerospace equipment and employs around 135,000 people employed throughout the U.S.

Nucor Corp (NUE) – Yield: 3.35% – Analysis
NUE is one of the few steel companies in the U.S. to remain competitive in its industry. It has streamlined and decentralized its management, and is on the leading edge when it comes to employee relations and their productivity.

Caterpillar Inc. (CAT) – Yield: 4.46% – Analysis
Eventhough CAT has foreign manufacturing facilities, much of the company’s equipment is still made in the U.S. While the U.S. economy sputtered in 2008, CAT’s exports from U.S. plants topped $16 billion, up from $12.6 billion billion dollars in 2007. CAT employs 53,000 people in 28 states.

The U.S. economy is still the largest in the world. At $46,000 per person in 2008, the GDP per capita, ranks around number ten in the world and the U.S. economy has enjoyed a stable overall GDP growth rate and a low unemployment rate over the years. Gloom and doom may sell papers and boost ratings, but when it is put in perspective, it is usually not nearly as bad as was originally presented.

Full Disclosure: Long WMT, MCD. See a list of all my income holdings here.

4 Responses to “News of the U.S.’s Demise May Be Premature *”

  1. Long Cat says:

    I’ve noticed that another Seeking Alpha writer, Dr. Kris from MIT has developed a really interesting item called the SMC analyzer….it puts together Modern Portfolio Theory and several market timing oscillators – seems she prefers the CCI – in regard to properly allocating assets.

    I’ve been involved in markets for many years and fund managers have never shown that they can effectively time the markets. Maybe they should take a look at it, since this seems to be hard math and there is no ‘human’ element to louse the results….

  2. Long CAT: That is interesting. Though I am not a “trader” I do find anything with a mathematical algorithm interesting.

    Best Wishes,

  3. coldtusker says:

    A better comparison would be the growth/decline of the share of exports from the US & China over the past 10 years.

    I fear that the USA will lose a good chunk of the 21% share in 10 years.

    The USA has dominated the aircraft/aerospace market but increased competition from smaller players like Embraer & Bombadier will hurt. They will graduate into larger players especially with support from the Chinese, Indians & Japanese. Boeing outsources to India & Japan critical technology.

    Caterpillar will lose/reduce its dominance as it battles ‘cheaper’ brands in Africa & Asia. It is a matter of time.


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