After hearing that his obituary had been published in the New York Journal, Mark Twain wrote, "The reports of my death are greatly exaggerated." There are several credible sources today that would have you believe that the USA is history. That we have had our best of times and they are well behind us. Allow me to suggest to you that while the arguments are logical, they are fundamentally flawed. Now that we have temporarily gotten past the drama in DC, let us get to the good news of the strong trump cards in our deck.
The bad news
Stephen King, chief economist at HSBC, and author of "When the Money Runs Out: The End of Western Affluence", for example, is clear that there are 5 strong reasons growth will remain subpar. Frankly, I can live with all of these arguments. Thanks to the independent research we pay for and study, I would add one m
ore piece of information that most people, including economists miss. The ratio of total USA debt (personal, corporate and government) to Gross Domestic Product may well be in excess of 300% debt to GDP, according to internationally known economist Lacy Hunt, Ph.D, bad things eventually happen to countries when debt exceeds 100% of GDP. However, I have not seen anything that takes away from the two aces that the USA holds.
Do the math
One of the best indicators of where the economy is headed is found by studying demographics. Most observers agree that GDP or total spending is comprised of three parts: government, business, and the consumer. The largest slice of that 3 piece American pie goes to the consumer weighing in at 70% of total spending. By looking at births last
year we see that there were 3.958 million births of American babies during calendar year 2012. There were 2.539 million deaths of American citizens last year, according to the Center for Disease Control. This means the country is growing.
But wait, there's more!
The world's population is likely to exceed 10 billion by the end of the century, up from 7 billion this year, according to research based on United Nations data. This same source shows that the only major developed nation projected to add significantly to its population is the United States. Which leads us to the biggest trump card you have yet to see. Just as the USA is replicating itself in births, it has another baby boom in the equation. You know there are about 76 million Baby Boomers, a group so large it changed everything from diapers, to Mustangs, to housing, and motorcycles. That group ranges in age from 67 to 49 this year. The new reality is the group has to work longer than it ever imagined but peak spending and peak earning may have peaked in the mid 40s. In our mid 40s we cannot spend enough, no matter how much we are earning because we had children that were driving our checkbooks in ways we never imagined.
The good news
The children of the Boomers, Gen X and Y are about the same number of people. So, while other developed countries are not duplicating themselves, the USA has roughly 70 to 80 million people in their 20s which means in about 10 years this group will pick up where the Boomers left off. There is a lag between Gen X & Y and the Baby Boomers, but stick around for the next 10 years as it will be the 1950's again.
Certain statements contained within are forward-looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties.
This information contained in this newsletter is general in nature and should not be construed as comprehensive financial, tax, or legal advice and the opinions expressed are not endorsed by NPC. As with any financial or legal matter, consult your qualified securities, tax, or legal representative before taking action.
While there are over 3,000 local financial advisers with many different opinions, it’s possible that not all firms in the Conejo Valley pay for independent research. This independent research is one of the features that helps investors see the larger picture and make appropriate, if not more informed decisions. The independent research has been used with investors in the workshops the firm conducts since1999 when John Grace became Master Certified and a Charter Member with the H S Dent Advisor’s Network.
“Master Certified” references those who pay a fee to learn about various economic trends and have demonstrated by passing tests the ability to effectively answer.
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