I read a lot of financial news and newsletters on a regular basis. One of the paid newsletters I subscribe to is Capital & Crises by Chris Mayer which discusses safe, non-speculative stock market investments. Today I got an email quoting Mr. Mayer which was pretty interesting. It was about the return of manufacturing jobs to the US.
“The weak U.S. dollar makes U.S. assets look cheap to foreign buyers,” comments our managing editor Chris Mayer. “And they are buying.”
In 2007, foreign purchases of U.S. assets topped $400 billion. That was a 93% increase over the year before. The top foreign purchasers were Canadian, British and German, with their loonies, pounds and euros. But the Middle East and Asia — most especially China — are quickly catching up.
“It’s interesting what they are buying, too,” Mayer writes. “Hardwood trees in Pennsylvania, for example. In fact, there are six Chinese companies in the process of closing deals in that state. The Chinese are also looking to set up manufacturing facilities here. The weak U.S. economy means that some pockets of the country have high unemployment — lots of skilled workers without their old manufacturing jobs. Enter the Chinese.“In South Carolina, the unemployment rate is 6.6% statewide. In some areas, it’s more like 10-15%. Chinese investment has come in to soak up some of that excess. Haier, a Chinese appliance maker, has a refrigerator plant in South Carolina. There is also a Chinese-owned chemical plant, a printing company and a general contractor.
“Not only can Chinese manufacturers find good workers, but land is cheap. Also, electricity is about a quarter of the cost in China. Plus, in South Carolina, the Chinese are closer to their customers — mostly Americans.
“It’s an odd mix of realities, isn’t it? First, America’s manufacturing jobs go to China. Now the Chinese are bringing them back. It’s not that simple, of course. But down on the ground, in small ways, there is this interesting shuffle going on. Even 10 years ago, I think such investments by Chinese businesses would have been very unusual. Over the next 10 years, I think such investments will become quite common.”
A few years ago, I realized that if the Federal Reserve weakened the dollar enough manufacturing jobs would start coming back. Accordingly, I bought a couple of rentals in the mid-west while they were still cheap. I paid $90k for a 5 year old, 1600 sq ft house, which looked pretty cheap to me since I was living in a $350K, 920 sq ft condo in San Diego. This is the first sign of manufacturing jobs coming back to the US. Hopefully the trend will continue. Maybe this is the only silver lining of the devaluation of the US Dollar.
You might want to also check out Mr. Mayer’s new book, Invest Like A DealMaker