Editor's note: A manufacturing transformation is underway here in the U.S...
As regular readers know, Joe Austin recently discussed this here in the Chaikin PowerFeed. In an essay last week, he noted a "comeback trade" with American manufacturing.
And as you would expect, other smart folks "in the room" have been keeping an eye on this story, too...
Today, we're sharing an essay from Joel Litman. Longtime readers will recognize Joel. He's the founder and chief investment officer of our corporate affiliate Altimetry.
Today's essay from him is an adapted version of a piece that was originally published in the June 23 edition of the free Altimetry Daily Authority e-letter. And in it, Joel shares his perspective on a comeback in U.S. industry...
China has spent the past two decades transforming itself into an industrial superpower...
The country now controls more than 40% of global refined copper, lithium, and rare earth metals. These resources are essential for making everything from electric vehicles to fighter jets.
It's almost impossible to exaggerate how powerful Chinese industry has become. Last year, a single Chinese shipbuilder produced more tonnage than the entire U.S. shipbuilding industry has managed since World War II.
And with 162 million factory workers as of 2023 – nearly triple the combined total of all NATO countries – its manufacturing dominance looks unshakable.
China's rise has triggered alarm bells across the Western world. In a future conflict, industrial scale might matter more than technology.
That's why the U.S. is taking a step it hasn't taken in decades: rebuilding its industrial base...
The U.S. is entering its biggest domestic investment cycle since before the Great Recession. Each of the past three administrations has taken steps to reignite domestic production.
In his first term, President Donald Trump implemented Section 232 tariffs on imported steel and aluminum. That pushed manufacturers to source metals from within the U.S.
Joe Biden followed this up with the Infrastructure Investment and Jobs Act. The bill unlocked $1.2 trillion for American roads, railways, broadband, and clean-energy projects.
And as we know, in his second term, Trump has doubled down on tariff-driven policies. He's expanding duties on foreign-manufactured goods to incentivize local production.
These efforts are designed to make domestic sourcing more competitive. And they aim to further discourage U.S. companies from relying on offshore suppliers.
And while it takes time for initiatives like these to sway the economy, we're starting to see some changes...
Aging Infrastructure Is Igniting America's Next Investment Cycle
To get a better sense of what's happening, we can look at the net-to-gross property, plant, and equipment (PP&E) ratio for the whole U.S. economy.
Gross PP&E represents the value of a company's assets when they were acquired. Net PP&E reflects their current value. So the ratio indicates the age of the assets... The lower the ratio, the older they are.
It's a good indicator of the amount of money we're investing in our country.
In 2001, the net-to-gross PP&E ratio sat between 58% and 59%. Said another way, the average company's assets were roughly 40% through their usable life.
By 2010, that metric dropped to between 56% and 57%. While it started ticking up by the end of Trump's first term, the pandemic took a toll. Companies put their investments on hold.
And by early 2021, as we emerged from the worst of COVID-19, the net-to-gross PP&E ratio had dropped to 54%.
But that trend started to reverse in 2022. The age of assets initially fell slowly... then really took off mid-last year.
We haven't seen acceleration like this since before the Great Recession...
Companies are investing heavily in domestic factories, logistics centers, and supply chains. Trends like data-center build-outs are accelerating the rise even faster.
It's hard not to look at China's scale and feel like the U.S. is falling behind. But the current administration is still pushing for investment, so this cycle could last for years.
But scale alone doesn't determine leadership. The U.S. is still the world's best growth engine. We're regaining the capabilities that once made us the global industrial leader.
Decades of neglect left U.S. industry brittle. Now, capital is finally flowing back in.
Companies are retooling their manufacturing hubs. Strategic sectors, like semiconductors and shipbuilding, are getting their first significant reinvestments since the 1990s.
The data is clear. Asset investment is accelerating across the board.
U.S. businesses are preparing to compete... and thrive.
Regards,
Joel Litman
Editor's note: America's manufacturing transformation isn't the only big story involving the U.S. government...
Across Washington D.C., political and military power brokers are racing to back stocks in a handful of little-known companies. This goes beyond investing – it's an act of national security priority.
Looking ahead, more government money is poised to flood into these stocks. And it could trigger the biggest buying spree in U.S. history.
That's why, this coming Tuesday, November 18, our corporate affiliate Stansberry Research is hosting a one-off special event to share the full story...
During this free event, you'll learn the types of stocks that Washington insiders are preparing to target. And you'll learn the name and ticker of the next related stock that every investor will wish they had owned in six months as part of it all.
Get the details and register to attend this free event here.
