Culture/Investing: Independent American Beers - Taste sells

I have to confess: Being an European I had had some prejudices about the American culture. Being a German I also wasn´t much fond of American beers. Brews like "Budweiser" seemed to me like dishwater. But since I`m traveling frequently to the U.S. my opinion changed. I found out, that there are lot of independent American breweries which offer a huge variety of specialties. I tasted some of them which are quite tasteful and can easily compete with German beers. Getting more curious I made a little research and found out that independent American beer brewers are on the rise (wikipedia). There are a growing number of regional brewers and more and more microbreweries catering local markets and different tastes.

These ambitions seem to pay even on the stock market. On Tuesday the Boston Beer Company reported their Q3 numbers. The corporation is one of the largest of the so-called independent beer brewers and produces the brand "Samuel Adams", one of my favorite American beers (finance.yahoo). The reddish-brown drink reminds me a bit to "Kölsch", a speciality of Cologne/Germany, but is stronger in taste.

Boston Beer had a strong quarter. Depletions, or the amount of beer sold by wholesalers an distributors, jumped 11% in the last quarter. The revenue of the whole company rose 8% compared to last year, earning per share climbed from $1,09 to $1.19. The stock more than doubled in the last 2 years. Taste sells.

Globalization: Welcome, Number Seven Billion!

The population of the world is growing. Today we reached the mark of seven billion human beings, guesses the United Nations. By the year 2100 this number should climb to ten billion, expects the organization. A reason to cheer?

Many commentators are complaining that the growing number of humans causes problems to feed them. They claim that the rising demand for food, oil, metals and other commodities causes scarcities and maybe famines and wars.

This reminds me to Thomas Robert Malthus (wikipedia). The English social philosopher and Anglican clergyman, who lived from 1766 till 1834, warned about the dangers of population growth. He predicted that population will grow faster than the production of food and other commodities, leading to famines and a shrinking quality of life for the masses ("The power of population is indefinitely greater than the power in the earth to produce subsistence for man"). Malthus is a long time dead and his pessimistic predictions didn´t realize, but his ideas still live like zombies. 

The pessimists don´t get it, that the wealth of the world is rising continuously, faster than the population. Around the year 1800 the world population reached just the number of one billion, by 1960 it climbed to three billion people. But we didn`t get poorer since then! Quite the opposite:  The wealth per capita climbed and people in Europe, U.S., Japan & Australia, the so-called Western World, are much more wealthier than one hundred years ago. And: Countries like China, Brazil and India, the so-called emerging markets, started the run to catch up very fast.

The explosion of population was overtrumped by an explosion of wealth, thanks to the steeply rising productivity. This is the result of the technical progress and the learning process. People learn to get better & better every day and companies learn how to produce goods & services more efficient, with leads to lower costs. Today workers worldwide produce much more goods & services per working hour than decades ago. Since centuries farmers are expanding their crops, because they use better seeds and better methods for planting, plowing and harvesting. Take for instance the global grain production which increased by roughly two per cent a year from 1950 to 1990 (green revolution).

These efficiency gains should continue, maybe even accelerate with the help of rapidly developing  computers and software and the progress in other sciences. For instance the U.S. is now boosting oil & gas productions, thanks to the technical progress in discovering & tapping the vast resources. There is also a lot of progress in genetic engineering which should guarantee a much larger food production.

The growing world population offers a huge chance because it will boost the markets for companies in Europe & U.S. Rising exports and income from foreign markets will help ripe nations like Japan and Germany where the population is stagnating. The income from the world markets could finance the retirement of the masses in countries where the average age is climbing.

Welcome No. 7 billion.

Economy: Think Global

Last week we learned that the U.S. accelerated its economic expansion in the Q3, which might have disappointed some pessimists. The GDP (a gauge for the national income) grew 2,5%, thanks to growing consumer expenditures and rising capital spending (investments) from the companies. And there was a third growth engine: Exports jumped 4% (plus 3,6% in Q3).

It looks like America is benefitting more & more from the growth of the global economy, especially in Asia & Latin America. The Chinese economy is expanding with a pace of around 9% and the Chinese need therefore more machines & consumer goods from the U.S. and from Europa. Other countries like India, Russia, Brazil and Turkey also show high economic growth rates and more appetite for imported goods & services. Shipments to foreign countries, especially to emerging markets, are helping a lot of U.S. and European companies override the weakness in their home markets.

“The global economy is growing, and the American companies that can tap into that broader economy can still post satisfactory results,” said Adolfo Laurenti, deputy chief economist at Mesirow Financial Inc., according to Bloomberg.

Take for instance Caterpillar, the world’s largest construction and mining-equipment maker. They reported that last quarter their profit jumped 44% compared to last year, and that revenues soared 41% and reached a new record. Bloomberg wrote that the numbers were boosted by advancing sales in China & Latin America.

Likewise, last week, Rory Read, the CEO of the semiconductor maker Advanced Micro Devices,  presented better-than-expected quarterly profits and a positive fourth-quarter outlook. "We saw double digit revenue and unit shipment growth in emerging markets like China and India", he explained.

Other companies like General Electric (power generators and more), DuPont (chemicals), Boeing, Honeywell (aerospace & chemicals) and McDonald´s also reported strong Q3-numbers and solid growth. These multinational corporations are benfitting from growth in their oversea markets, especially in Asia. Even European companies like Volkswagen show strong growth rates in spite of the weak European economies, thanks to the growth in the emerging markets in Asia & Latin America.

But Apple might be the largest beneficiary of the global growth. The Wall Street Journal Blog "All Things Digital" (allthingsd.com ) reported that Apple`s sales in the Asia Pacific region are rising to $14.3 billion during 2011. That’s an increase of 174%. To further visualize the change, realize that in 2010 the Asia Pacific segment represented just 13 percent of Apple’s total net sales and increased to 21% in 2011.

Apple CEO Tim Cook said recently, that the company’s prospects in China are very strong right now. “In my lifetime I’ve never seen a country with as many people rising into the middle class aspiring to buy products that Apple makes”.

Think global.

Economy: The Consumers Are Back

The U.S. economy, measured by the GDP (Gross Domestic Product, a gauge for the national income) grew 2,5% last quarter, faster than in the 2. quarter (plus 1,3%). The growth was fueled by higher consumer expenditures. Household purchases, the biggest part of the economy, increased at a more-than-projected 2.4% pace, Bloomberg reported. The increase in consumer spending last quarter followed a 0.7% gain in the second quarter and exceeded the 1.9 percent median forecast in a Bloomberg Survey. These purchases added 1.7% points to the growth number. Business investment (that is corporate spending on equipment and software) climbed at a 17.4% pace, the most in a year. It contributed 1.2% point to growth.

These numbers aren`t surprising. They fit to the strong retail sales numbers I wrote about recently (how-us-consumers-save-world). The new data confirm that the consumers are the engine of the U.S. economy. People are still optimistic instead of the perpetual negative news drum in the media. I guess this has a tradition in the U.S., maybe a heritage to the pioneer ancestors.

As long as the U.S. consumers are willing to expand their purchases the majority of the companies will flourish  and will overcome the problems in other parts of the U.S., such as the struggling financial sector or shrinking government expenditures.

Movies: Margaret

 

(Drivebycuriosity) - How would you feel if you were in involved in an fatal accident? How would you react if this event was partially caused by your behavior? This is the story of "Margaret". The movie (directed by Kenneth Lonergan) narrates how the life of a 17 year old girl changed after a shocking event  (imdb.com ). The main character is an unsure girl who explores her relationships with adults and her sexuality. After the accident her behavior gets even more unbalanced.

The low-budget film has an impressive cast: Matt Damon, Allison Janney, Jean Reno & Mark Ruffalo. But I was particularly impressed by Anna Paquin. The actress, who was around 25 while shooting this flick, accurately incarnated this 17 year old troubled girl. You could read even the juvenile insecurity and her growing disturbance in her face.

Margaret is a gripping and sometimes disturbing story. It`s  worth watching but the 150 minutes running time need a lot of patience.

Economy: What Caterpillar Wants To Tell Us

If we believe the media the world is in a mess and we are on the brink of a new global recession. But the companies, which are now reporting their business numbers from the 3. quarter, are sending us a very different message.

Take of instance Caterpillar. The world’s largest construction and mining-equipment maker is a gauge for the global economy. This morning the industrial giant reported strong numbers: Profit jumped 44% compared to last year, revenues soared 41% and reached a new record. The multinational corporation also lifted its profit guidance for the whole year.

"This was the best quarter for sales in our history, and our order backlog is at an all-time high," said Chairman and Chief Executive Officer Doug Oberhelman, in a press statement. "Although there is a good deal of economic and political uncertainty...we are not seeing it much," he added. Caterpillar management expects that the world economy will grow 3% in 2011 and 3.5% in 2012.

Economy: Bye, Bye Recession

Last week brought another deluge of news from the economic front. Their message was clear: The economic picture in the U.S. is getting brighter and the next recession is far away.

1. Manufacturing, which showed week spots in summer, seems to reaccelerate. Industrial production increased 0.2% in September and was 3.2% above its year-earlier level.

And the Philadelphia Federal Reserve reported that its manufacturing index ( a gauge of factory activity in the northeast U.S.) jumped to plus 8.7 in October (September minus  17.5 ), signaling growth in the region’s factories for the first time in three months.

2. The U.S. housing market also indicates some improvements. Total housing starts in September were 15.0% higher than in August. Most of the increase was for multi-family starts (department houses).

3. The job market continued its slow healing process. The number of weekly jobless claims sank to 403,000 (previous week 409,000). The 4 week average also dropped to 403,000, the lowest number since April. In the recession 2008/09 these numbers jumped above 600,000.

4. The positive economic picture got underlined by the companies which are now reporting their profit & revenues from the third quarter. Especially encouraging data came from CSX. As a carrier of consumer goods and raw material the railroad operator depends strongly upon economic development. In Q3 their revenues jumped 11% compared to last year with improved sales across most of the railroad's major markets. Michael Ward, the CEO of CSX, told the media “We are a good barometer of the economy and we did see some uptick in September”. (pragcap.com ) He continued: “It’s a normal fall peak where retailers are stocking the stores for the Christmas time…We do expect continued growth, not robust but modest, in the coming quarters.”

The stock market (S&P 500) reacted hesitantly and gained just 1% last week. Many market participants are still focusing on the European misery. But there is a high probability that the healing U.S. economy and the still strong growth in China and other emerging markets will rekindle the European exports and stabilize the ailing economies in Europe. These developments could lead to further rising stock prices.