Monday, September 25, 2006


Offshore Package Printing, Steve Forbert?, Capt. Bo

I'm often asked about "offshore package printing," that is, package printing that is used for goods that are imported here, sometimes reported as "stealth printing" referring to the fact that its value is not reported because it is part of the total product value. This is the issue as I see it, as I have written in Adam DeWitz' Printmode blog recently. Context: Adam was commenting about Keith Hevenor's 9/20 blog posting about the vibrancy of the packaging business now that he's involved in the CMM show since PennWell shuttered the print version of Electronic Publishing. The below is my stream of consciousness reply to Adam's question, but I must advise that I had studied this two years ago when doing my study on offshore printing, so the background is solid, but the writing below is not. And just as an opening comment, there still persists in the US a sense that we only import and never export. The trade data does a very bad job of capturing all of the crossborder activities, except it does a good job in old style manufactured goods and a rather horrid job in services, and a dreadful job in other stuff. So the data are flawed. Nonetheless, you do have to add imports less exports (which gives us a deficit) and add in foreign direct investment, which would be investments made in the US by overseas investors who cannot find anything to invest in in their countries. That's not an insult, that's a description: for example, if I make product A in the US, but I see an opportunity to sell more product A in Europe, I will probably build a product A plant in Europe once its sales volume justifies itself. Building that plant is called "direct investment." Biggest foreign real estate holders in the US? The Brits and the Dutch! Yet no one talks about them taking over our country. Once you add everything together, imports, exports, etc., it totals to 0. For some reason, the press never reports the months we set records for exports, which we have, quite often. It's just like there is never a report that the number of people working is at another record level... again... almost every month for the past year. Anyway, here's the comment I posted on PrintMode:

While we're importing more, we're exporting more, and many of the imported goods are in bulk and not packaged until they get here. It's really dynamic. I've figured that about $4b worth of packaging is part of the imports. It's not all that big, because so much of our packaging is for food, and that's either fully prepared here or arrives in bulk here and then packaged. In some cases, the imports are ingredients, such as cocoa or spices or other things. So it shouldn't automatically be assumed that the products need packaging. Packaging grows at the rate of 1% annually because of population, and then anything on top of that is the result of other effects, such as changes in preferences or innovations (people forget that there was a time when there wasn't frozen food!). It's a fascinating market because the materials and the filling technologies are all changing so much. As the world becomes wealthier, especially in emerging/developing economies, packaging will be a constantly growing and interesting business. It's becoming less so in the U.S. because household wealth is already so high and population growth is limited. Europe's population growth will not be all that good, in fact it is basically negative. But everywhere else in the world will be just plain fascinating.

Speaking of offshore, WSJ has a sky is falling story about U.S. owing more money to offsore investors than it gets in return from its own offshore investments.
Sorry, it doesn't make a difference. Interest rates (long-term bonds) are falling here and the returns overseas investors will get will decline. Interest rates are rising elsewhere. You can create dire situations depending on when you take the snapshot. Years ago I used to explain to my students that one of the worst things executives do is read the WSJ every day and decide based on what they just read to do something. There is quite the culture of "I believe the last thing I heard" among executives rather than building a preponderence of evidence. We see it the past few weeks: most economic data show very conflicting signs. Corporate profits are up; housing starts are down; inflation is high, commodities prices are falling. All data, every last bit of them, are historical, and those that often have reputations for being a way to predict marketplace conditions often give false signals. There are always times when executives have to act on the last thing they heard ("the building is on fire, sir"), but those should be rare. There are also too many times executives are indecisive, waiting for more and more data; by the time they have it, their opportunity has passed them by. Early '80s rocker Steve Forbert may have written it best, in a song that has absolutely nothing to do with business:
"I don't wanna see no fortune teller,
I'd rather do without prediction
I'll see it when it's all around me,
Hey, what's the hurry?"

Publishing guru Bob Sacks (known to his friends as "Capt. Bo" or "bosacks") has a an interesting article at Publishing Executive Magazine

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