Why are only Foreign companies investing in America?
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  1. #1
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    Default Why are only Foreign companies investing in America?

    Obviously, "only" is a bit of an exaggeration.
    But again and again, the big industrial projects, factories, refineries, steel mills, and other major investment in the USA are NOT being made by US companies, but, instead by foreign companies.

    What do they know that we dont know?
    US companies close plants, and move to Mexico.

    Meanwhile, the Dutch (Shell) are investing somewhere between $6 Billion and $10 Billion (they are being cagey about exact amounts) in ONE new polyethylene cracking plant in the Pittsburgh area, to take advantage of all that cheap natural gas.
    And, just down river a bit, the Thais and their partners the Koreans are building another $6 billion or so plant.
    And the Chinese state energy company just signed an agreement with West Virginia promising to spend up to $83 billion on energy projects in the upper Ohio.
    These are all Billions, with a B.

    Obviously they are getting tax breaks to do it, but so would US companies.
    The government claimed the new tax law would mean gigantic investment- but its mostly been by foreign companies.
    Toyota, Mazda, Volvo (which is chinese), Siemens, russian and indian steel companies, mexican cement companies, canadians, germans, japanese, chinese, koreans- they are all putting their money where their mouth is and building factories in the USA and hiring americans.
    Here is an interesting little slide show from january- most all of the companies are foreign.
    US Manufacturing Under Construction | IndustryWeek

    here is the NYT article today about the three big plastic cracking plants on the Ohio.

    Shell Sees New Role for Former Steel Region: Plastics - The New York Times

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    They take less profit home to stockholders ?
    They pay executives less ?
    They plan investments more carefully, and play a "Long Game" ?
    Not quarter-by-quarter ?

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    Ding-ding-ding

    Doug hit it on the head. THe same thing over and over destroys american business. Its wall st. Afraid of creeping socialism? Stop letting the rich steel everything, stop letting them get all the advantage and game the system. Leave something for the rest of us.

    Instead of feeding the horse enough oats to shit something out for the little birds, try feeding the little birds a share instead of picking through manure.

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    I would add that in order to complete a project of that scale you have to actually have a plan and some idea what you are doing. Most everyone who knows anything has left American business. Take you for an example Mr. Ries. From your posts you seem to have a good grasp on what you are doing. Are you working for a large American corporation? No? Why not? Maybe most everyone else feels the same way.

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    I don't know about the individual projects, but looking at the numbers- 2017 had $292 Billion FDIUS.

    Total private investments in 2017 was $3.44 Trillion. That went up in 2018 to $3.77 Trillion.

    I don't know what FDIUS was in 2018, presumably it went up a little also- recent years, global FDI has been down from historical levels.

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    Quote Originally Posted by jancollc View Post
    I don't know about the individual projects, but looking at the numbers- . . .
    The character of US private investments does matter a bit. Largest investments in recent years have been for LNG plants meant for export, data centers, and e-commerce distribution centers (think Amazon).

    So, in the first case we're taking natural gas out of the ground (with some concern about the effects on water supply and seismic stability) and selling it overseas. Could also point out that some of that foreign investment is to get access to our natural gas feedstocks.

    In the second place, we're helping the tech sector (on balance good, but with some concerns about the new "oil" being drilled into being customer data, witness Facebook).

    In the third place, we're also enabling greater sales of cheap imports -- which have actually gone up under the current administration.

    It's fair, I think, that our own private industry is near an order of magnitude larger than foreign investment. But it's also fair to think that our short-term make-money-off-money mentality has turned us away from domestic investment in manufacturing.

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    Quote Originally Posted by adh2000 View Post
    I would add that in order to complete a project of that scale you have to actually have a plan and some idea what you are doing. Most everyone who knows anything has left American business. Take you for an example Mr. Ries. From your posts you seem to have a good grasp on what you are doing. Are you working for a large American corporation? No? Why not? Maybe most everyone else feels the same way.
    Personally, I have been self employed since 1978, and have actually BEEN a corporation for about 20 years now. (As Mitt Romney told us, Corporations are People too- and, in my case, that is actually true). So I am kind of unemployable by a large American corporation, due to a 40 year gap in my resume.

    But there ARE a few US companies that seem to have plans and know what they are doing- Nucor, for example. Boeing, while definitely screwing up in rushing the 737Max, still is a major exporter, manufacturer, and employer, and invests in US facilities. Paccar, which built an engine plant in Mississippi about ten years ago, cranks out 150 13 liter diesel truck engines a day there. There are dozens more- Deere and CAT, or Haas, for example.

    But a lot of US dollars get invested in things like microtrading, fore-x trading, and other vaporware type of moneymaking activities.
    Obviously, there is money to be made building giant factories in the rust belt, or these three projects by the Thais, the Chinese, and the Dutch would not be happening.

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    Probably just one of several examples but I think foreign companies tend to plan further ahead than US ones. China is "famous" for long term planning.

    When US companies invest abroad is it for a quick profit or long term planning? I know what I think but I don't know for sure.

    We have some of the largest US companies building (and investing) here in Denmark. As long as jobs are created it's regarded as good.

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    All i can tell you over here, any company with significant American interest its all about share price, what ever drives that up is the business focus, even if that means gutting the place to achieve it. Very few American based companies seam to even consider more than todays bottom line looking forward. Not sure if this is just greed or no interest in playing a longer term gamble. It seams to be a american mind set thing too, if you watch even there mining stuff its always about most ore extracted, never about lowest cost to extract per ton.

    Most other places sure they want a profit, they want some dividends, but its nearly always about sustainable solid growth, make some money today, spend some so you can hopefully make a little more tomorrow. But very much not gut the place so you can still have a great buisness in 10 years time.

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    anyone hear the NPR ditty yesterday aboot China investing in things in Africa?
    teaching the children in Sudan to speak Chinese?
    investing in up grading remote villages?
    the long term gain /
    Gw

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    Quote Originally Posted by Greg White View Post
    anyone hear the NPR ditty yesterday aboot China investing in things in Africa?
    teaching the children in Sudan to speak Chinese?
    investing in up grading remote villages?
    the long term gain /
    Gw
    I've not heard what you post but I do know that China is investing in several African countries. Come to that then Greenland too.

    Whatever is going on then I'm sure it has been planned for years. "Spontaneous" isn't something I normally associate with Chinese foreign policy.

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    There is a bit of a racket going on when it comes to new, large(mostly foreign)new factories being built in the US. Gordon announces he is looking for a site for his new factory. Various states and cities beg him to come to their part of the country. They then start offering him all sorts of 'breaks' to entice him. Tax breaks, free land, water, new access roads, free training for the peasants. Gordon decides which suits him best and builds his factory. You have to wonder how much more investment the US would get if all the special deals were tabulated and then applied to everyone opening a business.
    When I worked for an oriental company in the 90's I was told that they had sent people to check the golf courses first. When they announced pay scales, the 'old money' sweetened the deal by telling them they could not pay that much. All equipment came in from the 'motherland' including $14 000 workbenches that sold for less than $300 from MMC! Management had to drive American cars though! They did give great benefits. Only one factory remains. My friend pays $50/month for his total benefit package. His healthcare has a $200 deductible and $1000 maximum 'out-of-pocket'

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    As an aside to the aforementioned "Royal Dutch Shell" corporation.

    I wanted 1 oil stock, so bought some RDS.

    This was maybe 5 years ago, and soon after I bought it, it dropped
    5-7%...Yikes I thought.

    Looking online, Shell announced a major decision (that caused
    the stock price dip). They got completely out of Venezuela,
    and "Doubled Down" (their words, not mine) on the new "Shell
    Appalachia" division, the start of the cracker plant et all.

    I have not written about RDS's safety programs.

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    Quote Originally Posted by digger doug View Post
    As an aside to the aforementioned "Royal Dutch Shell" corporation.

    I wanted 1 oil stock, so bought some RDS.

    This was maybe 5 years ago, and soon after I bought it, it dropped
    5-7%...Yikes I thought.

    Looking online, Shell announced a major decision (that caused
    the stock price dip). They got completely out of Venezuela,
    and "Doubled Down" (their words, not mine) on the new "Shell
    Appalachia" division, the start of the cracker plant et all.

    I have not written about RDS's safety programs.
    yeah, but how is the stock doing today? up or down?
    I tend to buy and hold stock in US manufacturing companies just cause I like em, but most have gone up in the long run. I own a little Lincoln and Miller (Illinois Tool), some Cat and Boeing and Paccar and so on. It aint getting me rich, but most of it holds its own.

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    I think there may be three things afoot.
    1. Large projects get attention, and so some foreign party building a $6B plant will be much more visible than Jo's Local Warehouse company expanding into 20 new warehouses.

    2. Sometimes total numbers are obscured - I've seen a number of credible claims that the deal NY was offering Amazon (which flipped), while it sounded like a "big break", would have actually netted NYC and NYS substantial net growth in taxes over time. I still think such manouvers should be illegal, but that's just me.

    3. (Maybe most important) - at any given time a given "area" (might be a country, region, set of countries) - will tend to specialize in a few high return things, and the bulk of the key players will be drawn to those things. In the US semiconductors, software, healthcare, and aircraft, suck up a lot of the brightest minds. Other very large swaths of the world have zero semidconductors, or aircraft production, and no healthcare products or important software to speak of.
    There was a paper cited in an economics blog which points out that essentially ALL of the world's machine tools come from a handful of places (and if you include semi-conductor equipment the US is a big player.) But it's NOT the case that EVERY region or country outside the US does plastics, machine tools, cars, or whatever. It's always a handful. And at least off hand it seems that none of them do semiconductors in a major way, etc.

    You might think "but the US is huge, surely there are enough bright minds to saturate every major field" - maybe not - not because of the numbers, but because of the returns to concentration - for example being a super-technie software person has been VERY rewarding in the US for the last 45+ years. Same group of people, same skills, NOT getting such rewards in Europe, India, South America, etc. - hence they try to come to the US.

    Also recall the distribution of capital. I can't find the chart anymore, but it pointed out that the value of all of the capital goods in the US, the majority (50+%) was in buildings, land, roads, etc. The next big hunk was planes, trains, automobiles, ships, oil wells, power plants, transmission lines, and computers and software. EVERYTHING ELSE was 10% or 20% or some other small fraction. ALL of the machinery in ALL of the process and manufacturing plants in the US is a quite small fraction of all capital value.

    I don't know what the value of new housing starts in the US will be this year, but I'll faint if it isn't vastly more than $6B.

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    Quote Originally Posted by Ries View Post
    yeah, but how is the stock doing today? up or down?
    I tend to buy and hold stock in US manufacturing companies just cause I like em, but most have gone up in the long run. I own a little Lincoln and Miller (Illinois Tool), some Cat and Boeing and Paccar and so on. It aint getting me rich, but most of it holds its own.
    It's been flat for years, pays a nice little dividend that helps smooth
    out the portfolio.

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    There are a lot of plus investments in the U.S. As far as planning ahead is concerned it is in the eye of the beholder. If someone wishes to invest in the market then they can and so later will still have money if they are good at it they will have more money. In fact when they invest in the market they invest in something.

    Not every one in the US nor overseas will ignore quick profits when they can be had. It could be said American investment in China Manufacturing all these years was definately a long term investment yet not good for anyone except maybe the persons living as a corporation.

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    Why are only Foreign companies investing in America?

    Not sure about the word "only" in that. When US companies "invest" in the USA are they investing or merely growing? Are there in fact any large US companies that only operate and sell in the USA?

    As good as all countries I can think of are delighted when foreign companies build and invest in their country as it usually means more jobs. Of course that's never the reason it's done. "There's money to be made" is as good as always the reason.

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    FWIW Shell employs many USA based employees, and invests a good
    portion of it's profits in same.

    How about Lincoln Investing in China ?
    it's being done.

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    its very basic. tax breaks and other incentives are larger for new factories being setup as opposed to existing factory adding on or upgrading
    .
    its like internet service goes from $40./month to $44./month but if you setup new account after not having an account for over 60 days you can get internet for $25./month.
    .
    former employer closing buildings the town still wanted their property taxes. so they demolished many building and made gravel fields cause if it was asphalt on top its taxed as a parking lot. town still wanted taxes said they had no record buildings were gone. they had to produce satellite pictures to prove buildings were demolished for years. company said they needed tax breaks to stay in business and NY would maybe reduce 1 or 2%, but Colorado or other states would have much lower taxes. NY was basically encouraging the demolishing of buildings by the dozens and encouraging factories being shutdown as fast as possible
    .
    thats why often its cheaper to setup a new factory in another State and get tax breaks rather than deal with existing State that local politicians feel will never leave their State. fact is its all too easy to setup factories far away to get lower taxes and better tariff rates. modern shipping rates it often doesnt matter much if factory is 100 or 10,000 miles away.


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