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My take on the DOW and PM pricing

I am increasingly confused at how confused some folks seem to be about the performance of the DOW. Recently I've had a few people point out that it's "proof" of what a great job our current president has done. What I don't think a lot of people realize is that a lot of what is fueling the DOW is US based companies deriving a majority of their revenue in foreign markets, especially emerging markets like China. I believe that if anything, the performance of the DOW, and how it has been derived, shows the failures of our current president as US companies continue to expand foreign investment because of more favorable climates than right here at home. The DOW may be somewhat masking how horrible the economy here in the US really is. With regard to the S&P 500, approximately 40% of the revenue of those companies came from overseas.

It is my belief that the performance of the DOW is keeping the price of PM's artificially low if the overall economy is considered. What I would hate to hazard a guess on is how long it may last. Some emerging markets like China may continue to show strength for quite some time. I have to wonder though, if US companies keep doing well in emerging markets that alone may not be enough to mask an otherwise crumbling economy here at home. Even though some stock market investors may continue to do well, at some point it seems like there will have to be more of an overall panic about our general economy. That is my humble opinion and guess anyway.

If we get a president in office that actually does something about our trade inequality with China that market may not be a lucrative for US companies.

Here is some information I complied for some local TEA Party folks that asked me to put something together. I think some of the percentages are pretty enlightening:

General Electric. $149 billion in revenue, 54 percent from overseas. GE prides itself on its international footprint, although a few industrial firms, such as Caterpillar and 3M, earn an even larger portion of their revenue overseas. GE has sizeable operations in Europe, China, Russia, and India, along with a significant presence in Africa, the Middle East, and other parts of the developing world. Overseas operations include infrastructure development and investment activities led by GE's financial arm.

And Obama’s “Jobs Czar” Jeffrey Immelt of GE last August announced that they would be shutting down the Winsconsin based X-Ray division and moving it to China. GE has announced they have hired 100 engineers to staff the division in China. GE plans to develop up to 25% of the divisions new products over the next several years in China. GE has said they will spend about 2 billion dollars to get the division up and running in China. Good news for GE investors since China is a great emerging market, but not so good for American workers, especially the laid off residents of Wisconsin. Obama charged Immelt with the task of creating new jobs. I guess he should have been more specific and told him that the jobs needed to be created in the US.

Ford. $129 billion in revenue, 51 percent from overseas. Foreign automakers sell a lot of cars in the United States, but U.S. carmakers are global, too. Ford, like General Motors, has a strong presence in Canada and Europe, while GM, through a joint venture, is one of the biggest carmakers in China—where its profits sometimes exceed those earned in the United States. Ford, meanwhile, has emerged as the strongest domestic automaker, which should help overseas sales.

BM. $100 billion in revenue, 64 percent from overseas. Like GE, IBM is another old-line firm that has grown roots throughout the globe and profited handsomely from globalization. IBM piggybacks on the global growth of its many corporate clients, while also pursuing new initiatives such as a big wireless-phone network in Africa. IBM aims to draw nearly 30 percent of its revenue from emerging markets by 2015.

Boeing. $64 billion in revenue, 41 percent from overseas. Airlines in Europe, Asia, and the Middle East are important customers, but Boeing still sells the majority of its planes to airlines in the United States. Boeing would love to increase foreign sales, but Europe's Airbus poses tough competition, and now Chinese manufacturers are getting into the commercial airline business.

Intel. $44 billion in revenue, 85 percent from overseas. Intel sells its chips and processors mainly to producers that build computers, which is why the company's biggest market is Taiwan, followed by China. The United States is third. Many of those chips sold overseas obviously make their way to the United States inside imported computers. Other companies that make technology components, such as Texas Instruments and AMD, earn a similar portion of revenue overseas.

Amazon. $34 billion in revenue, 45 percent from overseas. A lot of dot-com businesses take their time expanding overseas, since growth in the digital sector here in the United States is usually brisk enough to keep them busy. But Amazon has been around long enough to have set up robust operations in Canada, several European countries, Japan, and even China.

McDonald's. $24 billion in revenue, 66 percent from overseas. The fast-food chain might seem as American as 79-cent apple pie, but McDonald's earns the majority of its revenue from Europe and Asia. McDonald's learned long ago that it can't necessarily sell the same burgers and fries in foreign markets, which is why global operations focus on making sure foreign outlets fit into the local culture. At about 400 stores in China, McDonald's even delivers.

Nike. $21 billion in revenue, 50 percent from overseas. Sales in North America grew a healthy 13 percent last year, but in China they grew 16 percent—and in emerging markets, 19 percent. Americans may think of Nike as a ubiquitous sponsor of athletes in professional baseball, football, and basketball, but it also backs huge international events such as soccer's World Cup. Nike manufactures about one-third of its shoes in China, but also considers China one of its most important sources of sales growth in the future.

Maybe it is just me, but I find a lot of that pretty eye opening, and it's only the tip of the iceberg. It sure makes me a believer that even with the extreme increases we've had in PM's that they may actually be at artificially low levels right now.

Comments

  • derrybderryb Posts: 36,118 ✭✭✭✭✭
    It is no secret that the FOMC's number one priority is propping up all US equity indexes. From a political point of view most employed, unaware Americans do see it as a reflection of a good economy. Gold's current indicator is an inverse relationship with the US$. Look for the dollar to continue to weaken as all central banks fight to avoid having the strongest currency and equitites to continue to strengthen until the cat is out of the bag. Once equities begin their delayed, large drop there will be a mad rush to cash and PMs will temporarily suffer as they did in 08-09. The upcoming oil crisis (Iran) will throw a monkey wrench into unfolding events and will divert speculation dollars into oil and cash. Be prepared to sell paper gold, hold physical gold and buy on the rather large dip that will present itself as equities search for a new bottom.

    The decline from democracy to tyranny is both a natural and inevitable one.

  • jmski52jmski52 Posts: 22,305 ✭✭✭✭✭
    Immelt is one of the worst. I wonder when his karma will catch up to him.
    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • streeterstreeter Posts: 4,312 ✭✭✭✭✭
    RE; Chinese commercial airliner manufacture....you have to admire their spunk...but...

    I wonder how many hours they'll get on the airframe before it is retired? The rarest plane will be a Chinese 20 year old airplane. And people willing to board it.

    How many American or European businessmen will fly on that airliner? Not I.
    Have a nice day


  • << <i>Immelt is one of the worst. I wonder when his karma will catch up to him. >>



    A bit of trivia: OWS (Occupy Wall Street) pickets Immelt's Connecticut residence. The very next day tear gas is used on protesters in Oakland, and in a few weeks most protesters in other cities are evicted and physically removed. Coincidence? Does anyone think Immelt or his wife made a few phone calls?

    As for the op, not much there, it's been that way for a long time. In my opinion the stats shown have almost nothing to do with the price of gold. About 80% of the demand for physical gold is from Asia. The U.S. is for the most part a sideshow. China and India are driving the gold bus. Spend time analyzing those economies and you'll have a better handle on where gold is going and where it is going to go. The U.S. is less than 10% of world demand for physical gold. Go ahead and look at the 10% if you want, but it is worth maybe 10% of your time if gold is your primary market of interest.
  • JCMhoustonJCMhouston Posts: 5,306 ✭✭✭
    I don't think it has anything to do with the president, unles you are talking about every president over the past 40 years or so.

    The US is a country of roughly 310,000,000 (310 million) people. The World population is roughly 7,000,000,000 (7 BILLION) people. The math is fairly simple and shows that 95% of the worlds population lives outside the US, hence the reason US companies try to export to them. And when you start talking about markets one of the goals of a business is to minimize their total cost to get a product to a market, this leads to also doing manufacturing in those regions of the world where the new markets are emerging.

    The US trade deficit has been around much longer than Obama, our last trade surplus was around 1974 or 1975 if I recall. If you want to blame politicians in general (and the people who put them in power) then no question about it from me. But please don't listen to people that refuse to get facts straight simply because it doesn't fit their political agenda.

    What is a president going to do about the trade deficit with China (or any other country for that matter)?

    Raise the import duties - the electorate that put them in power would scream because their TV costs 3-4 times as much. Actually it would be worse than that, there are no TV's made in America and have not been any for at least 20 years, so that means no new TV's for anyone. And good golly, can you imagine the uproar if there were no new IPADS? Most Americans don't even care if they use child labor being paid $1/hr, do you think they care about the trade deficit enough to give up the toys?

    What if China then reacted by raising the export duty on those same toys that we love so much to double the cost?
    What if they stopped all US companies from operating/selling in China ( which is over 13% of the world population)?
    What if the WTO (which we are a member of like it or not) decided we had acted illegally and allowed China to put on enough tariffs to essentially cut out all exports to them?

    I gues there might be something a president could do, but I can't think of any offhand.
  • mhammermanmhammerman Posts: 3,769 ✭✭✭
    Want your jobs back? You're going to have to earn them the hard way; better, smarter, faster, cheaper. Can't just do the talk, you gotta walk the walk. The market place is competitive, that means someone wins and someone loses and in most cases, the better man wins. Yes, the DOW is juiced from overseas corporate income and it reflects international business more than when we were making the stuff ourselves, accept it for what it is...the value of the company and no longer simply a barometer of US manufacturing. This ain't your father's Oldsmobile. Now, gold is a completely different story.

    Hummmmmmmmm...wondering if this is why the jobs are overseas. You can read it but it is easier to just scroll to the charts at the end of the article.
    Maybe this is why...
  • derrybderryb Posts: 36,118 ✭✭✭✭✭


    << <i>Want your jobs back? You're going to have to earn them the hard way; better, smarter, faster, cheaper. Can't just do the talk, you gotta walk the walk. The market place is competitive, that means someone wins and someone loses and in most cases, the better man wins. Yes, the DOW is juiced from overseas corporate income and it reflects international business more than when we were making the stuff ourselves, accept it for what it is...the value of the company and no longer simply a barometer of US manufacturing. This ain't your father's Oldsmobile. Now, gold is a completely different story.

    Hummmmmmmmm...wondering if this is why the jobs are overseas. You can read it but it is easier to just scroll to the charts at the end of the article.
    Maybe this is why... >>


    Sorry, but the cheaper man wins, especially if he doesn't have an overpaid union boss arguing that he should do less for more.

    The decline from democracy to tyranny is both a natural and inevitable one.

  • secondrepublicsecondrepublic Posts: 2,619 ✭✭✭
    Wall Street Journal had an article several days ago explaining that if you take out Apple, the profit performance of the remaining companies is far, far lower on average. Apple has been so incredibly profitable compared to others that it's really skewing the average results for everyone. Other businesses aren't doing so well at all.
    "Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
  • derrybderryb Posts: 36,118 ✭✭✭✭✭


    << <i>Wall Street Journal had an article several days ago explaining that if you take out Apple, the profit performance of the remaining companies is far, far lower on average. Apple has been so incredibly profitable compared to others that it's really skewing the average results for everyone. Other businesses aren't doing so well at all. >>


    If you take out Apple's China sweatshops, you take out much of its profit.

    The decline from democracy to tyranny is both a natural and inevitable one.

  • JustacommemanJustacommeman Posts: 22,847 ✭✭✭✭✭
    This Forum is notorious for wanting its cake and eating it also. Thank goodness we have access to emerging markets.

    Im in Canada skiing at the moment. All the locals are complaining how expensive their beer is to consume in Canada. They covet their trips to Florida where the beer is half as much at resorts.

    We have an unofficial weak dollar policy for a reason. Witness our rising stock market. You can look at gold as a reflection in the financial mirror or as a score pad so to speak. Weak dollar and rising corporate profits amongst multi national US companies isn't exactly a secret sauce recipe.

    I've stated this before but American's will not spend more to simply buy things because they are Made In The USA. They say they will until they take their wallets out at the cash register and amenesia sets in. We vote with our wallets in our daily commerce. It is what it is. Figure out a cheaper way and you are golden.

    MJ
    Walker Proof Digital Album
    Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
  • jmski52jmski52 Posts: 22,305 ✭✭✭✭✭
    Sometimes, better is cheaper. Cheaper is not always better. My $0.02.
    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • cohodkcohodk Posts: 18,553 ✭✭✭✭✭
    I think in some areas, real estate has actually overshot the bottom. People will look back and say "woulda, coulda, shoulda".
    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

  • streeterstreeter Posts: 4,312 ✭✭✭✭✭


    << <i>I think in some areas, real estate has actually overshot the bottom. People will look back and say "woulda, coulda, shoulda". >>



    this
    Have a nice day
  • secondrepublicsecondrepublic Posts: 2,619 ✭✭✭


    << <i>I think in some areas, real estate has actually overshot the bottom. People will look back and say "woulda, coulda, shoulda". >>



    Amen, brother! You're preaching that to the choir over here. image
    "Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
  • bluelobsterbluelobster Posts: 1,220 ✭✭✭
    Good grief, we live in a global economy and global trade is a good thing. It seems the premise of the OP is that, if the Dow was lower, it would be a good thing and if US companies did not derive a strong business from over seas, it would be a good thing, gold would be higher and what ever government resided over this anemic but purely domestic economy would be a "good" government.


    I disagree.
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