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Tuesday, 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.

Tags: [BA] [CAT] [MCD] [NUE] [WMT]

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