GE’s shining example proves manufacturing is alive and well
Well, what do you know? Maybe President Obama’s choice of General Electric CEO Jeff Immelt to chair the new Council on Jobs and Competitiveness wasn’t such a bad idea after all. Exposure to the plight of the American worker seems to have helped Immelt see the light.
Immelt recently confirmed that 60 percent of GE’s forecasted $145 billion in revenue this year will come from outside U.S. borders. But nearly 46 percent of the company’s employees are U.S.-based – and Immelt plans to grow that number, capitalizing on “tremendous demand” for heavy machinery abroad. General Electric has reportedly streamlined its manufacturing processes so much that labor now makes up only 10 percent to 20 percent of its cost of goods sold.
The $14.2 billion that GE earned last year, but paid no taxes on, may have had a teensy bit to do with its hiring plans. Strong foreign demand for its products, coupled with a relatively weak U.S. dollar, helps make U.S. goods more cost-competitive abroad. But if GE’s strong international profits are helping create jobs here, it’s hard to complain.
American workers are starting to hold their own against foreign labor in the battle for jobs.
Mesirow Financial chief economist Diane Swonk notes that America is enjoying “a renaissance in the manufacturing sector.” It’s not across-the-board, but many heavy manufacturers are earning good money abroad and accelerating hiring in the U.S.
Ask the Fool
Q: What are “actively managed” mutual funds? – C.R., St. Augustine, Fla.
A: They’re funds run by professionals who try to maximize performance by hand-picking investments. A large-cap equity mutual fund, for example, will be full of large-company stocks selected by the fund’s managers.
Passively managed funds, meanwhile, commonly known as “index funds,” aim to mirror the components of an existing index. An index fund based on the Standard & Poor’s 500 will hold the 500 stocks in that index, in the same proportion as the index.
The irony we love to point out is that the vast majority of actively managed stock funds underperform the overall stock market and the index funds that track it. Perhaps the biggest reason is costs, since, in order to mimic an index, passively managed funds don’t need to employ lots of analysts.
Learn more at www.fool.com/mutualfunds /mutualfunds.htm and www.indexfunds.com/learn.php. You can research funds at www.morningstar.com.
Q: Where online can I look up the rate of home value appreciation in a region? – P.D., Brooklyn, N.Y.
A: One good resource is mortgage giant Freddie Mac. At www.freddiemac.com/ finance/fmhpi, it provides its Freddie Mac House Price Index (FMHPI), measuring typical price inflation for houses nationally and within each state. Or look up data on 20 metropolitan regions via the S&P/Case-Shiller Indexes at www.standardandpoors.com. Realtor.com offers local market conditions, too.
My dumbest investment
Here was the situation: Exodus Communications and Amazon.com were both trading for around $6 per share. I laughed at the idea of paying $6 for an online bookstore, so I went with the Internet service provider. I was left with a $6,000 sheet of wallpaper. – D.B., online
The Fool responds: If you were looking at Amazon at $6 per share, that must have been in 2001, when the shares were near an all-time low. It was around then that Exodus filed for bankruptcy protection, too. If you’d parked $6,000 in Amazon then and held on, you’d have more than $200,000 now. But Amazon’s future wasn’t quite so clear a decade ago.
In situations where you’re not sure, you might divide your money between your candidates – though you shouldn’t spread yourself too thin or own more companies than you can keep up with. Better still, do more research and thinking until you’re more confident in your decision. Despite Amazon’s success, it’s the kind of company Warren Buffett has avoided, as he isn’t as certain about its future as he is about the soft-drink business, insurance or railroads.