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The Dynamic Wealth Report
September 18, 2009
'Buy American' Hurts Americans
by Corey Williams, Editor
I’ve got to come right out and say it. I’m fed up with
the incompetence in Washington.
It’s no secret our government is bitterly divided down party lines. Issues are politicized for personal gain. And re-election seems to be
the only thing politicians on either side of the isle really care about.
But something I caught wind of the other day really burns me up. It’s
just stupidity in my opinion. And it’s putting the brakes on stimulus
funds. Funds our economy desperately needs to pull us out of the recession.
It’s the ‘Buy American’ clause attached to the stimulus funds.
Now before you string me up for being anti-American, let me explain. I
want American tax dollars to create American jobs. But ‘Buy American’ is
nothing more than a political stunt designed to help politicians get
re-elected. It doesn’t help create new jobs.
I understand it sounds great to say we want stimulus funds to buy stuff
made by Americans. It’s simple to think we’ll get the most out of these
funds by buying everything from American companies. But that logic is
too simple.
The truth of the matter is we live in an interconnected world.
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You can thank free trade agreements like NAFTA for dictating how
businesses operate. I’m not here to argue one way or the other for free
trade agreements. But this is the reality we live in. Doesn’t it make
sense to draft legislation that fits within the current framework of our
economy?
Right now, American companies manufacture products in China, Canada,
Mexico, and many other places around the world. And foreign companies
have manufacturing facilities in the US and employ American workers.
I read an article in the Wall Street Journal earlier this week that
points out just how bad the situation is.
The article points out cities are trying to put American workers back to
work rebuilding our outdated sewage systems. But essential parts of
these systems are built in Canada.
Thanks to the ‘Buy American’ provision, these projects are being delayed.
The cities are being forced to seek an exemption from the provision. The
result is American workers who could be working on these infrastructure
products aren’t.
There aren’t any official statistics on how many projects are being
delayed because they need foreign made parts. And there’s no list of how
many exemptions have been sought.
But I can tell you only $13 billion of the stimulus funds have been paid
out so far. And that’s a far cry from the amount of funds that are
available. I don’t think its a leap to say stimulus funds are being
delayed because of the ‘Buy American’ provision.
I guess there’s one thing that bothers me more than anything. We’re
seeing other countries implement their stimulus packages faster and more
efficiently than we are.
It’s time we get the message through to our elected officials. We’re not
going to stand for Washington’s incompetence. I encourage you to let
your representatives know how you feel about counterproductive
legislation like this.
In the meantime, investors are stuck with the cards we’ve been dealt. And
we need to find the best place to put our money to work.
If you’re looking for a country that’s getting the most out of its
stimulus package, take a look at China. The Chinese government is
committed to growing their economy by 8% a year. And their actions are
speaking louder than any American politician's words.
The way it’s shaping up, the Chinese economy is going to outpace the US
by a landslide. And their stock market is too. If you don’t own Chinese
stocks already, I’ve got an easy way for you to add some.
It’s an ETF of US listed Chinese stocks. The PowerShares Golden Dragon
Halter USX China Portfolio (PGJ).
I believe the US economy is going to recover. We’ll get things
straightened out… eventually.
Right now China is doing more to get their economy growing. I expect
Chinese stocks to outperform US stocks over the next few years. And PGJ
is a great way to make sure you don’t miss out on this great opportunity.
• MGM Mirage (MGM) was upgraded by Argus this
week. They now have a buy rating on the stock. Management is shoring up
the balance sheet. And a recovery in ‘Sin City’ cash flows is looking up
as the economy recovers.
• Shanda Interactive (SNDA) was downgraded to sell by
Deutsche Securities. They’re spinning off their gaming segment that
accounts for 95% of their revenue. It doesn’t sound like they’ll have
much of a business left.
• Needham started coverage on Synaptics (SYNA) this
week with a buy rating. The company generates a huge amount of cash from
touch screens for Apple’s iPhone.
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