Why invest in the US now?

The world’s leading investors have spent billions on US firms in the last 60 days.

• Warren Buffet: General Electric & Goldman Sachs
• Prince Al Waleed bin Talal: Citigroup & Apple
• Bill Gates: Republic Services (solid waste management)
• Carl Icahn: Citigroup & Biogen
• Carlos Slim: Citigroup & Saks 5th Avenue
• Edward Lampert: AutoNation & AutoZone
• George Soros: Chesapeake Energy & Wal-Mart
• T. Boone Pickens: Chesapeake Energy & Valero Energy

These investors have each made billions in the past and are confident they will return more billions in the future. They see tremendous opportunities and are confident the US and world economies will turnaround in the coming years. Allan’s Take adds the following:

1. Global companies are investing in the US.

• This week the Belgian/Brazilian brewer INBEV bought Anheuser Busch for US $52 billion in cash at the premium price of US $70 per share.
• BCE Canada’s largest telecom company will likely close a huge US acquisition by year’s end.
• Fortune Magazine reports “Foreigners are Grabbing US Assets.”

2. Attitudes in the US are changing. All across the US teens, black,     white, Hispanic are having their dreadlocks cut. They are pulling up     their baggy pants. They are joining the Army. Seems change has     been discussed so much by so many and with Obama’s win SO REAL     that many are changing on a personal level. Going through drive-ins     manned by youngsters and oldsters you can feel and see the     change. Attitude change leads to productivity improvement.     Research shows that 34% of financial performance directly results     from how people are led and just the reality of our new leader     winning has already created a level of excitement I have not     experienced since the Kennedy Camelot in the 1960’s. This could     evaporate, of course, but I think not, it’s too fundamental, too basal,     too encompassing.

3. But US companies like General Motors are the walking dead you     say?

GM stock is trading at the $3 level – amazing – and sad. The US Congress gave the financial sector over US $ one trillion but seems unwilling to give the industrial sector US $25 billion –amazing – and sad. Reflect on the following:

• The largest car market in Europe is Russia and the biggest car company there is GM with sales growing at 44% per year.
• The world’s second largest car market is China and the biggest car company there is GM.
• The world’s fastest selling car? Yup, you guessed it – GM’s Chevy at 2.5 million cars/yr
• The world’s fastest selling truck? Ford’s F150 at one million trucks/yr

So why are these companies in trouble? Because of embedded costs like health care which is the single largest cost in the manufacturing of a car in the US and other policy issues. It’s not the US autoworker as Toyota has become America’s largest auto manufacturer using only US workers. BMW, Mercedes and other foreign car makers do very well with US workers.

There are many US companies doing extremely well: Abbott Labs, Amgen, Apple, Caterpillar, General Mills, HP, Hudson City Bank, IBM, McDonald’s, Rohm & Haas, Wal-Mart & Wynn Resorts just to name a few in the S&P 500 with an average rise this year of over 20%.

4. The next economic transformation will be from IT to ET – from Information Technology to Energy Technology (pardon the alien alliteration). There is a whole family of at least nine groups of technologies underway many of which will be leap frogged onto logarithmic growth in the coming months including: WT – wind energy technologies, GT natural gas technologies, ST – solar energy technologies, NT – both nuclear fission & fusion energy technologies, BT – many types of biofuels & biomass energy technologies, TT –geothermal energy technologies, OT – all six kinds of ocean energy technologies including tidal, undersea and wave, HT–hydro energy technologies and RT – reducing energy technologies to save energy. Yes, I know the dramatic drop in oil prices could dissipate the enthusiasm for ET, but this time, I think not. ET’s a trifecta: it will be cheaper, it will be cleaner and it will be ours triangulating economic, environmental and political spheres of concern.

   T. Boone Pickens has developed a plan largely focused on WT and GT. He forecasts five million new jobs will be created in wind –WT, 2 million each in gas—GT and solar– ST. Total 9 million jobs which will put ALL out of work Americans to work, not only those 4 million at the moment but all those forecast to be out of work from the deepening of today’s’ recession.

5. The world’s largest investor, now the US government, has invested US $7 trillion in the US. This is double the total inflation adjusted spending on the Louisiana & Alaska Purchases — $267 billion, the New Deal $500 billion, the Korean & Vietnam wars — $ 1.2 trillion and the race to the moon — $217 billion plus all other NASA expenditures over nearly 50 years –$850 billion. Even more startling the money is being borrowed at 2% and guaranteed to return at least 5% on a preferred ownership basis. The earnings on this investment will most likely be over US $10 trillion.

Add up the above: attitudes enhancing productivity, US enterprise success and the coming ET –Energy Technology transformation and you can understand why the world’s leading billionaire investors; the US government and many foreign companies are investing their billions in the US just this month in spite of the global financial crisis.

This entry was posted on Monday, December 1st, 2008 at 11:34 pm and is filed under Global Economics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.