Just how much money have European companies spent “shopping” here? A whopping $87 billion in the third quarter alone, according to Bloomberg.
That’s more in three months than they spent in the entire previous year! What’s more, it was the most they’ve spent in any quarter since 2008! Global merger and acquisition volume overall surged to $887 billion, up 29 percent from 2013.
Among the major transactions: German drugmaker Merck KGaA said it would spend more than $16 billion to buy Sigma-Aldrich (SIAL, Weiss Ratings: B+). Roche Holding of Switzerland said it would buy InterMune (ITMN, Weiss Ratings: D) for $8 billion. And Swedish appliance maker Electrolux said it would snap up the appliance business of General Electric (GE, Weiss Ratings: B) for $3.3 billion.
What’s going on? Why is so much corporate European money pouring into the U.S. … right alongside even larger flows of private investor money?
It’s all part of a Global Money Tsunami! Frightened investors all over the world are moving money out of economies and markets with excessive risks and IN to economies and markets with greater stability. They’re worried sick about war, political chaos, currency devaluation, asset confiscation — or worse! So they’re flocking to the U.S.!
At the same time, opportunistic companies are surveying the economic environment in Europe and just shaking their heads. Not to put too fine a point on it, but business stinks over there! There was zero growth in the second quarter, and since then we’ve learned that things are getting even worse.
A sampling of this week’s headlines: Euro-zone manufacturing slumped to a 14-month low in September. New orders in the biggest European economy, Germany, dropped at the fastest rate since 2012. Unemployment remains stuck at a near-record of 11.5 percent. And a key index of consumer and business confidence just fell to a 10-month low of 99.9 in September.
|ADP reported that the U.S. created more than 20,000 construction jobs in September.|
We’re not exactly firing on all cylinders here in the U.S. But we are doing a heck of a lot better than Europe is. The 4.6 percent GDP growth we racked up in Q2 beats the pants off of their 0 percent.
We also learned from ADP that the U.S. created a better-than-expected 213,000 jobs in September. That was up from 202,000 in August, and the job adds were widespread across construction (+20,000), manufacturing (+35,000), trade and transport (+38,000), and professional and business services (+29,000).
So the money flood is continuing, helping bolster our stock markets, our companies, and our currency — at the expense of European companies, European stocks and the euro currency. In fact, it just plunged to a two-year low of 1.2590 against the dollar.
Faced with a Global Money Tsunami like this, you have a very important choice: Do nothing and let the waves drag you under … or take action and try to stay ahead of the flood! You can probably figure out which alternative sounds better to me.
That’s why I’ve repeatedly emphasized that you should invest in highly rated, U.S.-focused companies and industries like domestic energy, health care, aerospace, steel, MLPs, and select financials. I’ve also been advising you stay the heck away from most European markets, and companies exposed to weakness elsewhere (China, Brazil, etc).
I think that’s still a winning proposition — with the caveat that we have to monitor the U.S.’s resilience. At some point, we could get dragged down too if domestic strength can’t offset foreign weakness. Conservative investors may want to do what I’ve been recommending in Safe Money Report — cutting a loser or two, trimming the sails a bit, and making other proactive portfolio adjustments.
So where do you stand? Do you think the U.S. is better off than Europe, and why? Are you adjusting your investment strategy to take that into account? What foreign markets do you find attractive at this time, if any?
Until next time,