| Best of W$$WF: Aug. 13, 2004
Immigrants and the economy
KAREN GIBBS: As New York prepares for the Republican national convention, all eyes are on Manhattan. I visited New York for a different purpose to see firsthand what some consider the new American economy, an economy that thrives on its immigrant community.
The debate over immigration in this country has been going on since the second boat landed on these shores. Many argue over the social cost of our open borders. That misses the real story. The ethnic groups in the U.S. have combined buying powers of $1 trillion. The streets are not paved with gold, but there is ample opportunity for a diverse and ample cultures.
(video package begins)
Originally aired Oct. 17, 2003
GIBBS: Welcome to Astoria, where the streets are filled with people, traffic and commerce. It's one of the most ethnically diverse neighborhoods in the entire country, and like many immigrant communities, it's at the epicenter of a new American economy where immigrants are playing an increasingly more important role. We're here to talk to some of those immigrant entrepreneurs to find out what they have to say about jobs, business and the economy.
TONY BARSAMIAN: Originally Astoria was more of a factory town.
GIBBS: No one knows the community better than Tony Barsamian, a second generation Armenian. Barsamian is the editor and publisher of the Queens Gazette, a highly successful local weekly.
BARSAMIAN: You see here we have a complete ethnic diversity: every imaginable religion, every imaginable culture.
GIBBS: In fact, the variety of immigrants is staggering -- 118 different nationalities. From Bangladesh to Argentina to Lebanon, the streets sizzle with ethnic culture and cuisine.
BARSAMIAN: The opportunity is here, but you've got to work. Nothing is given to you.
GIBBS: Obviously, these people don't mind working hard.
BARSAMIAN: No. They love working. And they want to just make a better place for themselves and their children and their families. It is a little microcosm of old, small-town USA. It's not the traditional Norman Rockwell, because everyone's skin color and shading is different, it's a great colorful mixture. The only thing I can say is that it works.
GIBBS: It worked for Thomas Chen, president and founder of a window and door manufacturing plant. Chen came from Taiwan 21 years ago with no English and little money. His company, Crystal Window and Door Systems now has sales of $46 million and 500 employees.
Immigrant success stories abound here. In the area of western Queens around Astoria, there are more than 6,000 companies, 20 percent more than there were in 1995.
What's happening to create all the business activity? We took a subway ride with Dan Miner, a vice president of a local non-profit economic development group, to get some answers. From the subway we could see the Triborough bridge which links Astoria with Manhattan and Wall Street. Miner, who is of Ukranian descent, believes immigrants are the lifeblood of the local economy.
(To Miner) A lot of these immigrants are coming from nations where maybe the financial system is not as strong and they don't have the confidence. What do these immigrants see here in the United States, the American dream, that makes it so attractive?
DAN MINER: Opportunity, Karen, they're here for opportunity.
GIBBS: Opportunity. Talk about the opportunity and the independent thinking part.
MINER: The new Americans who have come to the United States to find their fortune, to strike it rich, to make a new future, from many, many different countries, are definitely independent thinkers. They're willing to take risks, they're willing to go places they haven't been to. And Queens is an ideal place for these folks, perhaps more so than other areas in the United States, because there's already an unusual degree of ethnic diversity here.
GIBBS: Many national studies indicate the importance of immigrants to the economy: Creating new businesses, filling many entry level jobs. It all adds up to a $200 billion boost to the economy. Given the importance of immigration to the economy, we invited four community and business leaders from Astoria to a local restaurant, famous for being the set for several episodes of the hit television series, The Sopranos. Among the guests: Tony Barsamian; Thomas Chen also joined us; and Jitendra Tomar, an Indian business manager for Kawasaki Rail; and Syed Ullah, a Bangladeshi community leader.
GIBBS: What is it that immigrants see, the independent thinking that they pick up more so than people that are born here in the United States?
BARSAMIAN: They are driven because if they don't succeed, the failure is far more deadly than it would be for somebody in this country who knows that they can loaf around for a year or two and find their way. It's not such an easy thing. You have to succeed.
GIBBS: Syed, I see you agreeing with that. Tell me why this is such a vibrant community. And can this vibrancy translate into the overall U.S. economy?
SYED ULLAH: If these small entrepreneurs, if they make it, the U.S. economy is bound to reflect their success.
GIBBS: Now Thomas, what I'm seeing is a very vibrant, diverse economy here in Astoria, a booming economy, if I can say that, while much of the rest of the United States is going through an economic slump. Is this immigrant economy strong enough to pull the rest of the U.S. economy out of its malaise?
THOMAS CHEN: I would say yes, definitely.
GIBBS: Chen said his company not only has expanded to other American cities like Boston and Chicago, but it has invested in a windows factory in China.
(To Tomar) Particularly with your company, Kawasaki Rail Car, not only in Yonkers but in the heartland, Lincoln, Nebraska.
TOMAR: Well, and that's a huge investment. That's the first plant in the United States to make 100-percent-made-in-America (rail) cars. No other car manufacturer has that capacity. So that's counter to the argument that jobs are going out. In fact, we are bringing jobs in.
GIBBS: Tomar has some concerns, but he is still bullish on the American economy.
TOMAR: If I were buying the future, that's where I would put my money actually, right here in the United States.
GIBBS: And on that note, gentlemen -- Thomas, Syed and Tony, thank you very much for a wonderful roundtable.
(video package ends)
GIBBS: So how can investors take advantage of all this spending power? What companies are poised to profit from this trend? Alex Lopez Negrete helps corporations tap into this wellspring. He's owner of the ad agency Lopez Negrete and he joins us from Houston. And joining us from San Diego, Todd Buchholz, an economic forecaster and managing director of Enso Capital Management.
So, Todd, tell me, you've seen the story about Astoria. Are there many Astorias across the United States?
TODD BUCHHOLZ: Oh, yes, Karen, and it's not just in what we think of as the metropolitan areas, New York, Texas, California. Even in the Midwest, ketchup is no longer king. Salsa outsells ketchup. That's just one symbol of how the economy has been changing, and the changing tastes of immigrant communities has spread across the nation entirely.
GIBBS: Alex, what does this increased buying power of multi-ethnic communities mean for corporate America?
ALEX LOPEZ NEGRETE: Well, it means a huge answer, Karen. What's happening here is, you know, the immigrant and the ethnic communities have been here all along, but all of a sudden corporate America has really awakened to the fact that, wow, in the case of the Hispanic community, we have a market as large as the entire Canadian consumer market, actually larger, within our own borders, right here access to our stores, to our banks, to our services. Boy, it's time to really take a look at inviting them in. This is particularly salient in the post, shall we say the dot-gone era, where companies, corporate America is looking for new answers for new profits for growth.
BUCHHOLZ: In fact, Karen, that's where the money is and the money is coming from. You look at the auto sector, almost all of the growth in the automobile sector is coming from Hispanic Americans. Together Hispanics, Asian Americans and African Americans have over $1 trillion - $1 trillion of buying power. That's more than the Pentagon. They're not buying tanks. They're not buying missiles. They're buying homes, they're buying automobiles, and they're buying clothing and entertainment.
LOPEZ NEGRETE: We at the agency, we seem to sometimes be in the myth-busting business where we really are showing our clients, you know, Hispanics are buying homes. Hispanics are buying new cars. Hispanics are buying luxury items, clothing, fragrance, whatever it is. I mean it really is an amazing market. The Hispanic consumer segment alone represents $1.1 trillion in buying power by the year 2008. You're absolutely right.
GIBBS: So we've got sectors. Let's get some companies. Alex, starting with you, what companies are benefiting from this growing economic diversity?
LOPEZ NEGRETE: Anybody who has an initiative, Karen, is benefiting. This is a hugely responsive segment. You know, we've been doing business with Bank of America for ten years, the same thing with Wal-Mart, and it's just, you know, every seed you plant brings you business. It's a very responsive consumer segment, mainly because it's been so ignored for so many years and there's such a huge need. As Todd said, you know, not only do we have homes and cars, I mean it's really everything. When you look at the average age of the Hispanic household and the size of that household, we're in the prime buying times for setting up our household. So we're buying refrigerators and we're buying appliances and we're buying furniture, you name it.
GIBBS: And it's not just Hispanics, Todd, we're looking at. You already mentioned the auto sector. Give me a company that benefits, and let's talk about housing starts. These are the two main engines that drive this U.S. economy.
BUCHHOLZ: Well, exactly. Just quickly on the auto side, Toyota today was describing its $800 million investment in a new plant south of San Antonio. Well, I can assure you that most of those employees, a huge proportion of them will be Hispanic Americans. And you know what? They're going to be buying Toyotas. In the housing and finance sector, Bank of America was already mentioned by Alex. You know they've developed a product whereby Hispanic Americans can deposit money in an ATM card and have their relatives in Mexico draw on that card in pesos. Companies in the home building and home sector, well, of course Fannie Mae has been a huge player in expanding home ownership, especially to minority communities. Let me give you a statistic, Karen. Over the last five years in this housing boom, Caucasian Americans have bought 9 percent more homes. That's terrific. African Americans have bought 24 percent more homes, and Latin Americans have bought 36 percent more homes. Now, the Asian Americans are also a big part of this story. And there are several companies, several small, medium-size banks that are either founded by or cater to that Asian American community. East West Bancorp is one of them, UCBH is another. The Asian Americans are notorious, or I should say famous for being big savers, and those kinds of banks are benefiting.
GIBBS: Alex, I see you nodding. How about media and fast food? What companies there are appealing?
LOPEZ NEGRETE: Well, in the fast food industry, the QSR segment has been very busy for a number of years. McDonald's has always invested very well in the community and reaped great dividends from that. But you have Jack in the Box where, you know, Jack is Jack whether he speaks English or Spanish. And it's just the QSR segment has always done well. In our case we represent Sonic, and it's a very American concept that seems to be taking off rather well with Hispanic consumers. So you certainly have a number of categories that are just becoming more and more active.
GIBBS: Alex, who's behind the curve?
LOPEZ NEGRETE: Who's behind the curve? Well, I would say that first and foremost we have the pharmaceutical industry. We have the apparel/fragrance, and just the wearables category. I think that they have been, they have suffered from what I call analysis paralysis, in that they just don't know how to deal with the market, so they don't. But I see a lot of them coming on. In fact you also see the high tech industry or the technological industry really getting very interested as they see Hispanics going online at dramatically fast rates.
GIBBS: Now, I have to ask both of you, Alex first, do you have a relationship with any of the companies that you've mentioned?
LOPEZ NEGRETE: Yes. Actually this year we were proud to be named Hispanic agency of record for Microsoft.
GIBBS: Todd, any disclosures from you?
BUCHHOLZ: I own shares in Bank America, and Fannie Mae has contributed to some of the research I've done on the housing sector.
GIBBS: Todd Buchholz and Alex Lopez Negrete, thank you very much for joining us.
GEOFF COLVIN: It's hard to remember that wine was a part of our immigrant culture. Over the past few years it has become almost as American as a chili cheese dog with curly fries.
We make and drink wine in growing quantities. We don't think about investing in wine. David Rynecki immersed himself in the wine trade and turned up intoxicating results. I asked him what kind of person should invest in very expensive grape juice.
Originally aired March 19, 2004
DAVID RYNECKI: Well, I think that for the average person who's interested in this, first they have to have just a natural interest in wine. You don't have to be an expert, but you want to be a little bit more interested in wine than, say, your Two-Buck Chucks.
COLVIN: Okay, so you don't have to be the kind of person who can identify 1982 Chateau Margaux blindfolded.
RYNECKI: No, you don't have to be that person at all. Because what's simple about it, and this is what makes wine investing beautiful compared to stock investing, in stock investing you have 7,000, 8,000 public companies and just as many mutual funds. It's impossible to actually figure out what will do well. In wine investing, you're really talking about 20 to 25 blue chip wines, and they primarily come from the Bordeaux region of France.
COLVIN: Well, some of them have done fabulously. I mean if we look at some of the returns, just over almost 5 years, a little less than 5 years, Chateau Lafite-Rothschild, up 875 percent; Le Pin, up 700 percent; Chateau Petrus, 531 percent. Those are fabulous returns for 5 years.
RYNECKI: Exactly. And what's remarkable here is it's not like Chateau Latour was an IPO in 1998 or 1999. These are wineries that have been around for hundreds of years in some cases. And we know that every couple of years they come out with a new wine that will be spectacular. This spring the wine shops and different wine aficionados will be going over to France and tasting the first of the 2003 Bordeaux, that's last year's Bordeaux. It won't actually arrive in stores until 2006, but people can start ordering it now.
COLVIN: Right. Well, now where should you order it from? Should you wait until it's in a store and buy it there? Should you buy it from the producer, or what?
RYNECKI: You can wait, but, if you want to take a bet, if you feel like Chateau Margaux or Chateau Latour, which are extremely sought-after wines, if you feel like over time those will do well, then what you can do is find out about what are called futures. You can go to a service such as Wine-searcher.com, which is obviously an Internet site. And most cities have at least one or two shops that will offer these wines.
COLVIN: As an investment, you know stocks and bonds don't care if the room is too hot or too cold, and if you drop them you can pick them up again. Isn't keeping wine a little bit of a pain?
RYNECKI: Well, that's one of the funny things. In fact one of the biggest warnings you have to give people is keep this away from your relatives. I have a friend who had a very special bottle of Italian wine, a Barolo, it was quite old and just very valuable and also personally valuable. He had some relatives come to town and they drank it. So you've got that issue. You don't want to store it near a heater. So one of the things you have to make sure is that you have a place to keep it. There's also a patience factor here. You've go to wait five years, 10 years, 15 years before the wine is actually worth a lot of money. So in that time you have to figure out what's going to happen, well, think of it this way. Okay, there are 500 cases of a certain wine made each year. Now every time someone opens a bottle of that wine, there is less supply. And even if the demand stays the same, the supply going down is going to increase the value of the wine.
COLVIN: These great Bordeauxs that you're talking about generally sell for hundreds of dollars a bottle even when they're brand new. Do you need a lot of money to get started with this?
RYNECKI: Not really. There's a service called Winebid.com that allows you to buy special wines just one bottle at a time and you can do that. I know some people who each year as a gift to each other will buy a bottle, or in some cases a case if it's more affordable, and hold on to it and watch it mature, and that will become their investment over time. If you can buy it by the case it's going to be much easier, because certain wine shops will require that you buy a case if it's of a future of Bordeaux.
COLVIN: And in some cases I gather buying a whole case and keeping it intact makes it more valuable when the time comes to sell it. Now this is going to sound like a stupid joke question, but it's really not. When it's time to sell wine, how liquid is the market?
RYNECKI: Well, that's going to depend on the economy, and there will be moments when the wine is not sought after. But when you take wines like Petrus and Margaux, Latour, Haut-Brion, these wines always have a market, and that's why if someone is going to do this, in order to minimize the risk as much as possible, they want to stick to those blue chips of Bordeaux where there's always going to be a market. The price will fluctuate, but if they hold on for time, then they will probably see a nice return.
COLVIN: Well, and there's another point to be made, and you have made it in the past, which is there is a worst-case scenario that's not so bad when you own great wine, right?
RYNECKI: Sure, you can drink it.
COLVIN: David Rynecki, thank you very much.
RYNECKI: Thanks, Geoff.
COLVIN: Now, Let's drink this in: When super value investor Whitney Tilson appeared on our show a short while back, he called this market environment the toughest he had ever witnessed. Every single asset class was just about overvalued, and there we no bargains to be had.
(video excerpt begins)
"I will sit on cash until I'm, I like to call it trembling with greed, where I'm sort of pinching myself, saying I can't believe the market is so badly misunderstanding this particular company that it's pricing this stock at such a low level that I can buy in at half of what I think it's really worth. And trembling with greed opportunities over the past really 6 to 12 months have been few and far between, and so cash has built up in my portfolio."
(video excerpt ends)
Whitney promised he'd get back to us when he found something worth investing in. And true to his word, he let us know that he just bought shares of the world's leading retailer of athletic footwear and apparel, a company called Foot Locker.
Now Foot Locker was a poorly performing unfocused retailer in the late 1990s, but management began a major turnaround and implemented what Whitney considers to be an enormously successful restructuring plan. They closed underperforming stores, got rid of non-core businesses like Kinney shoes and Burger King franchises, and repaired it's broken relationship with it's most important supplier, Nike.
Whitney says, now the company has a strong balance sheet, a focused business strategy and is generating a lot of cash. The stock is selling right now for about $22 and Whitney predicts the stock will trade at about 35 bucks within two years or so. That's about a 60 percent return on your money. That might just make you jump in your Nikes.