8/11/2011 1:51 PM ET|
5 stocks for the decline of the US
The nation's economy is a major mess, and the situation is unlikely to change soon. Investors, take note -- and turn to stocks with strong global ties and better growth potential.
As a proud American, it pains me to say this, but from my viewpoint, the United States is in decline. Our fiscal house is an absolute mess, and the recent debate over raising the debt ceiling just highlights how bad the situation has become.
Neither Democrats nor Republicans have any real solutions to the trio of big problems facing the United States: grotesque government spending, runaway regulation on business and oppressive taxation. So is it any wonder our economy is grew at an anemic annual rate of 1.3% for the second quarter? Meanwhile, China, an ostensibly communist country, is experiencing annual economic growth of 9.5%.
How should an investor react to the U.S. decline? By picking the best companies out there with an international focus.
Moreover, you want to hold companies that have significant market share in industries likely to grow regardless of what is happening with the broader U.S. economy.
The following five stocks are positioned to prevail even as the U.S. decline continues.
Growth may be tepid in the United States, but China, India, Brazil and Russia are experiencing rapid economic growth, and that growth requires huge investment in construction projects.
Many of these projects involve heavy-duty construction equipment of the type made by Caterpillar (CAT, news). The iconic brand can be found in nearly every corner of the globe, and that means Caterpillar will have a pipeline with serious revenue coming in to support its shares for years to come.
As Third World nations become Second World nations, and Second World nations grow their way into First World status, we are liable to see the mammoth Coca-Cola brand become exponentially bigger.
While the company has a substantial business in the United States, its international operations have really fizzed in recent years, and that makes the stock one to own.
McDonald's (MCD, news) has made a mission out of penetrating more countries than any other restaurant chain in history. Global growth has helped fuel the company's profits over the past decade, and Wall Street has noticed: Shares in the Oak Brook, Ill., company are up 190% over the period.
The company is aggressively grabbing market share in the United States by rolling out healthier menu options like fruit smoothies and oatmeal, as well as updated restaurants that often feature wireless Internet access. Globally, as consumers get a taste of McDonald's, investors will likely continue to see the value of their shares fatten up.
Philip Morris International
It may be uncouth to light up a cigarette in a major U.S. city like New York or Los Angeles, but in some countries, smoking is as common as breathing.
The ubiquity of the habit, particularly in the emerging markets of Asia, is helping tobacco giant Philip Morris International (PM, news), which controls the rights outside the United States to such brands as Marlboro, Virginia Slims and Parliament. The company is therefore positioned to sell more cigarettes as smokers in rapid-growth emerging markets earn more and trade up to premium brands.
Potash of Saskatchewan
The world is hungry. In countries like China and India there's exploding demand for high-quality, high-protein foods. Growing the grain needed to feed the demand for cattle, pigs and chickens is increasingly difficult, and getting maximum yield out of each acre of farmland requires a lot of fertilizer. That's where Potash of Saskatchewan (POT, news) comes in.
The company produces and sells fertilizers and related products. As more countries become wealthy enough to upgrade their diets, there will be greater demand for fertilizer from Potash.
|5 stocks with global focus|
|Company||Sector||12-month sales growth||Net profit margin|
|Caterpillar (CAT, news)||Earth-moving equipment||31%||8%|
|Coca-Cola (KO, news)||Carbonated drinks, juices, water||13%||30%|
|McDonald's (MCD, news)||Fast-food restaurants||6%||20%|
|Philip Morris International (PM, news)||Cigarettes||9%||11%|
|Potash of Saskatchewan (POT, news)||Fertilizer||64%||31%|
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grotesque government spending, runaway regulation on business and oppressive taxationObviously the author never had much of a background on economics.
All the BRIC countries he claims are going to supplant us are far more socialistic and hands on with their economies than the US. True their GDP is at the level of other major economies now and they've got enviable growth, but that doesn't help his point.
The WSJ and Heritage foundation rank all of the BRIC states near the bottom in their Economic Freedom report. The most free market of them is Brazil and it's at 111 out of the 142 countries assessed. It's governed by an avowedly Marxist party who's backdoor nationalized their oil mining and controls more than a quarter of the financial sector.
The other BRIC he cites are even more socialistic according to the WSJ and in the last five years they've all moved to increase government involvement. Looking at the examples Woods gave the inferable conclusions are exactly the opposite of what he argues.
What an idiot. I can maybe see his point about federal spending, but the LACK of serious regulation combined with ridiculous tax cuts even for the wealthy helped CAUSED the very economic problems this jerk appears to be so concerned about. The last two items on his list aren't just wrong...they don 't even exist. If ONLY they DID!
Yet he thinks both dems and repubs are basically clueless...he must support the Tea Party or maybe the libertarians, then. Sure sounds like it to me.
That was a beautiful speech worthy of a presidential or CNBC teleprompter. Now, here are the facts:
-Record debt way beyond anything in history.
-Real debt to GDP ratio that exceeds that of Greece or Italy.
(the US income is less than the interest payment requirements on the debt, let alone the debt itself)
-FIrst time official loss of US's AAA rating (though we haven't been "AAA" since post-Lehman)
-Unemployment getting worse (record low labor participation rate, underemployment, big layoffs getting bigger (see: postal service), 99'ers)
- Big Banks, Wall Street, Federal Reserve, Congress, Treasury corruption...no comment required.
-Record Food Stamp usage in history (read: added debt)
- Real Estate declines continue (foreclosures, Fannie, Freddie, bank losses)
-Global economic contagion ties with world (banking is not "American" only)
- US Dollar value the lowest in history. (what do you get for that buck?...not much.)
- US inflation on top of low dollar value (fuel, food, etc) (yes, getting less in that package and paying the same price is inflation)
- States, municipalities going into bankruptcy
- Congress...no comment required.
- Record disasters (floods, drought, storms, oil spills, quakes, nukes (yes we pay for Japan too).
- Record war costs
- Record entitlement costs (defense, social security, medicare, etc)
- Record gold prices
- Record low US Treasury bond yields
Ok...I'll stop there...I think you get the point that it's not mostly about others "eating our lunch", but rather us eating ourselves...and others.
Mr. Woods, like every other analysts, seems to have conviniently overlooked several factors that contribute to the rise of China:
1) Savings rate is extremely high in China. This is a cultural phenomenon due to the fact that the communist regime, ironically, does not provide its own citizens with so-called "socialist" safety cushions that the US and Europe provides, such as pension, social security, medicare, etc. As a result Chinese citizens have more purchasing power and less debt due to the fact that they have persistently saved for decades.
2) Much of China's marvelous economic growth is due to the outsourcing of jobs from America. While plenty of indigenious Chinese companies have sprung up in the last few decades, major employers and investors in China are still foreign companies, many of which are US companies hungry for the potential 1 billion plus consumers in China. So China's growth is very much dependent on the jobs that US corporations provides its citizens, and not because of its own ingenuity or productivity.
3) China artificially depresses it currency to keep its exports cheap, so that it can continue to compete with the US and Europe, even as the rising wealth of its citizens should have appreciated the Yuan substantially above it's current value. This amounts to nothing less than cheating, but the US will never call China out on it as long as China keeps financing our debt.
4) China has no laws protecting its citizens or its environment. As a result, many companies have raked in major profits by paying their workers less than a living wage, and often cut corners to save money rather than protecting their workers with a safe working environment. Pollution in China from unregulated manufacturing facilities is also very severe, so much so that the vast majority of rivers and lakes in China are now too toxic for fish or other life to exist, and requires substantial treatment before it is safe for human consumption. Soil erosion is also a major problem in China, reducing the amount of farmland and gazing pastures for cattle.
Given China's absolute disregard for international law, human rights, and the environment, as well as it's utter dependence on foreign investment for growth, I don't think they are to be admired, but rather, they should be pitied. The only thing we really need for America to be great again is to establish incentives that reward companies for hiring in the US, and punish them for hiring overseas. Without a source of external investment, China's economy will grind to a halt while America's economy will flourish.
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