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The Daily Reckoning | Monday, March 19, 2012 Tumbleweeds pass through the Daily Reckoning HQ... The reckoning must go on... Plus, Chris Mayer dispels the notion that US manufacturing is dead... ------------------------------------------------------ REVEALED: How You Could Profit From Oil and Gold Moves...Up or Down Every Monday you get an email. Every Friday you have a chance to cash out for gains. Even the tiniest swings in oil and gold prices can hand you mega-gains. Get all the details on this hidden strategy — right here. Greg Kadajski, holding down the fort, from an eerily quiet Daily Reckoning HQ... Greg Kadajski Joel is some 36,000 feet above the Pacific; Eric is at a similar altitude over Central America; and our Reckoner-in-Chief is still on sabbatical, in some remote part of the Argentine pampas. But that doesn’t stop the world from turning, dear reader. Nor does it prevent us from reckoning with it. So we’ll get straight to it... In today’s, slightly abbreviated, edition of The Daily Reckoning, we attempt to dispel a few ugly rumors about one major sector of the US economy...and why it’s poised for a huge comeback. Perennial DR- favorite Chris Mayer does the heavy lifting for us in his insightful essay below... Regards, Greg Kadajski Associate Editor, The Daily Reckoning World oil production is about to be shaken to its core... You won’t believe which nation analysts at Wall Street’s biggest banks expect to become the world’s biggest energy producer by 2017 — or the effect it will have on America... our economy... our future... Click here to see who is set to become the new king of oil — and how you can use the news to go for big profits as early as this MAY! The Daily Reckoning Presents Made in America...Again! Chris Mayer One of the great things about markets is how they are always changing. They never cease to surprise. But the market, as sly as it is, sometimes tips its hand. While killing some time at the JFK airport a couple weeks ago, I grabbed a copy of Bloomberg Markets magazine and perused it over breakfast. There was one story that struck me titled “Time to Head Home for Some Manufacturers.” The basic gist is that American manufacturing is more competitive than most people think. But the manufacturers themselves are starting to notice. And so some of them are opening up new plants in the US or relocating far-flung plants back home. The math is pretty simple. The big lures that sent them abroad — cheap labor and cheap fuel — are no longer so attractive. As I noted on Feb. 3, the wage gap has shrunk. Wages in China and other overseas markets have gone up a bunch while US wages have stagnated. Cheap fuel has long since expired as a reality. Oil is the big factor and crude oil averaged north of $100 a barrel last year for the first time ever. But natural gas is another lure to come back to the US. In China, for example, natural gas prices are twice what they are here. There is more: The US dollar has lost a quarter of its purchasing power since 2002 against a basket of 20 major currencies. That makes US assets and talent cheaper compared with similar assets and talent overseas. The raw costs are only part of the equation. There is the soft stuff to consider as well, things like intellectual property risks and the fragility of supply chains. The Japanese tsunami and floods in Thailand caused major disruptions for manufacturers. And the US itself is still the world’s largest market. Therefore, the thinking goes, it could be better to make things closer to the customers that buy them. Researchers at Gartner predict that 20% of the goods made in Asia for the US will shift back to the US by 2014. Surveys of manufacturers show many are considering moving operations back to the US. As we continue to slog our way through second-quarter earnings, we see more companies announcing investment in the US. This is true from the giants like Caterpillar to the smaller players like Carlisle. Carlisle Companies is a small conglomerate that makes tires and insulation and more. CEO Dave Roberts recently wrote: “We find it as cheap to manufacture in the US as in China.” If you got caught saying something like that in public, even just a couple of years ago, people would’ve written you off as idiotic, blindly patriotic or fit for the madhouse. Maybe all three. In Manhattan [last month], I attended the Gabelli’s 22nd annual Pump, Vale & Motor Symposium. There, a dozen industrials trotted out there stories. These were companies with blue collars working in places such as Batavia, N.Y., and Mansfield, Ohio. It was hard to walk away from there thinking the world was going to end. There are a lot of companies doing some pretty cool things. Their backlogs are healthy. And while nearly everyone was cautious about making any kind of robust forecast, it was clear that business was not bad. Among the various presenters, Flowserve was one of the most red, white and blue. Its last acquisition in 2011 was for Lawrence Pumps, a company based in Massachusetts. Before that, in 2010, Flowserve picked up Valbart, an Italian manufacturer that is now opening a plant in Houston. Of course, many people still think we don’t make anything in America anymore. I read a great piece in The Atlantic recently called “Making It in America,” by Adam Davidson. An excerpt: “We do still make things here, even though many people don’t believe me when I tell them that. Depending on which stats you believe, the United States is either the No. 1 or No. 2 manufacturer in the world (China may have surpassed us in the past year or two). Whatever the country’s current rank, its manufacturing output continues to grow strongly; in the past decade alone, output from American factories, adjusted for inflation, has risen by a third.” What trips people up is the shedding of manufacturing jobs. Just in the 10 years ending in 2009, the US shed more manufacturing jobs than it gained in the previous 70 years. About one in three such jobs disappeared. Davidson continues: “Is there a crisis in manufacturing in America? Looking just at the dollar value of manufacturing output, the answer seems to be an emphatic no. Domestic manufacturers make and sell more goods than ever before. Their success has been grounded in incredible increases in productivity, which is a positive way of saying that factories produce more with fewer workers.” Still, there is a human dimension to all of this — those lost jobs and the people involved today whose jobs are hardly secure. I highly recommend Davidson’s piece if you want to get a better understanding of what’s going on. As an investor, though, clearly, it pays to shed the old ideas that the US is not competitive as a manufacturer and that we don’t make anything here anymore. Neither is true. And that insight can make you some money. Regards, Chris Mayer for The Daily Reckoning -------------------------------------------------------- Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor at joel@dailyreckoning.com Make “Big Oil” pay for your retirement Oil fat cats got rich on $4 gas. Now how’d you like to make them pay you back? This little-known “loophole” let’s you collect up to triple the retirement income most stocks or bonds pay... without touching the stock market... and all while “Big Oil” gets stuck with the bill. Click here now for all the details.