|
 |
|
|
|||
|
|||
|
|
Los Angeles is best known as the center of the global entertainment industry. And certainly, Hollywood's film industry is a global behemoth. But the Southern California city is also host to a lower-profile industry that carries arguably even more importance for the U.S. economy. Specifically, look out over the Pacific Ocean on any given day, and you're likely to see a line of gigantic ships stretching toward the horizon. Most hail from Asia and are headed to the ports of Los Angeles and Long Beach. On an average day last summer, these ports received nearly 24,000 shipping containers -- known as twenty-foot equivalent units -- or TEUs -- loaded with goods ranging from televisions to auto parts to toys. That's about +10% more containers than these two ports handled just one year earlier.
Of course, consumer goods and container shipping are just one part of global trade -- trade in commodities is every bit as important. For example, U.S. imports of oil total more than 13 million barrels per day, and Chinese crude imports have grown from zero to more than 3.3 million barrels per day since 1992. Furthermore, agricultural products from Brazil and the U.S. feed countries in Asia, Europe, and the Middle East. There are literally thousands of globally traded metals, agricultural products, and energy commodities. Growth in trade should come as little surprise -- just consider the products you use every day. If you're like most Americans, many of the goods you consume are made or produced outside the U.S. Whether you own a Japanese car, an Italian suit, or simply enjoy Chilean avocados in the winter months, you're a participant in global trade. In fact, you may be importing goods without even knowing it. For example, most American cars actually contain significant amounts of foreign-made parts. Plus, the fuel you use to power your car is sourced from all over the globe. And it's not just manufactured products -- that jar of mayonnaise in your refrigerator quite possibly contains palm oil from Indonesia, sugar from Brazil, and eggs from the U.S. And just as you enjoy foreign goods, foreign countries are big consumers of U.S. products. In fact, while America is the world's largest importer, it's also the globe's second largest exporter. American agricultural products, movies, advanced technologies, and a host of other items are exported to countries all over the world. Of course, this isn't just a U.S. centric phenomenon. Consumers around the world are increasingly buying goods sourced from distant corners of the globe. For instance, while most pundits focus on China's growing exports, the nation is also among the world's largest importers. In China, rapid economic growth spells rapidly rising disposable income. This jump in available income has been a factor in Chinese imports, which have increased at an annualized pace of more than +27% over the past four years. And global trade is likely to continue growing. Over the past three decades, most countries in the developed and developing world alike have gradually been reducing barriers to trade. Countries have reduced tariffs on imported goods and eliminated limits on certain exports. Protectionist policies once designed to favor domestic companies over foreign competitors have been softened or dismantled in many cases. While global free trade is still a work in progress, there have been meaningful steps taken to encourage trade and open up markets to outsiders. Moreover, it's cheaper to move goods now than at any time in the past. Before the advent of container shipping in the 1950s and 1960s, shipping goods meant loading individual irregular-shaped items onto a ship. This proved inefficient, as there was no way to move many individual items at once, and securing odd-shaped goods for an ocean voyage took a great deal of time and labor. Nowadays, items are packed into standard 20 or 40-foot long containers that can be stacked neatly on the decks of giant ships. Standardizing containers makes it easier to handle loading, unloading, and bundling cargo from multiple shippers. And the development of ever-larger and more energy-efficient container ships has made it even cheaper to transport items. Rapid growth in global trade and increased efficiency certainly impacts a myriad of industries. Manufacturers can now source parts from all over the world, looking for the best price and quality. And producers of goods and commodities no longer have to sell their wares locally -- it's easy and cheap to load products onto a ship and transport them almost anywhere in the world. But the most direct play on burgeoning global trade is the transportation industry -- companies that physically move goods and commodities from producers to consumers. And when it comes to international trade, most goods and commodities are carried the same way they were two or three centuries ago -- by ship. Companies that own fleets of container ships charge a fee to move all those goods to wherever in the world they are needed. Plus, the big energy companies rent tankers to move oil from the Middle East to the U.S. for refining. Add in the growth of Chinese imports, and you can see why the shipping industry has been doing quite well in recent years. Even better, the global transportation industry offers an attractive one-two punch for investors -- solid growth powered by rising trade, coupled with dividend yields that hover close to 10%. Here are our favorite plays on
the burgeoning business of trade . . . Good investing!
Paul Tracy founded StreetAuthority and became Chief Investment Strategist in 2001. Prior to that he spent several years as Managing Editor at a multi-million dollar financial publishing firm with over 150,000 subscribers. In addition to his role as managing editor and lead financial writer, he was also responsible for equity research and managing a team of seasoned professional financial writers, researchers and market commentators. Paul's previous experience includes a position at Robert W. Baird & Co.'s full-service brokerage operations as well as economic research work on a Money and Banking project funded by the National Bureau of Economic Research. He has also spent time doing outside consulting and research for the University of Virginia, has appeared as a guest expert on several prominent financial radio shows, and has been a featured speaker at various investment conferences across the U.S. Paul graduated with a B.S.
in Finance and Management from the McIntire School of Commerce at the
University of Virginia.
|
|
|||||||||||||||||||||||
|
||||
You
see, the Los Angeles area is a key center of the U.S. container port
industry, accounting for as much as 15% of all containers shipped into
the U.S. on a given day. And as our chart shows, container ship traffic
has been growing exponentially since the early 1990s in both Southern
California and other key U.S. ports.
