June 5, 2013


American Decline? It's Not as Bad as You Think (LAWRENCE CREATURA, June 3, 2013, US News)

[O]ur advantages are not limited to natural resources; U.S. human and capital resources are also strong. With a liberal immigration policy, 99 percent literacy and a relatively young median age of 36.6 years, we have a population ready to work. This significant human resource can be accessed by using America's financial resources: $15.4 trillion of capital is in the U.S. stock market every day, stalking the best ideas.

Most importantly, America has one resource which is scarcer and more valuable than all the rest -- the "secret sauce." If you were in Junior Achievement, they called it entrepreneurship; in the world of high finance, "risk tolerance." You might hear a politician refer to it as "the American Spirit." Simply put, there is a reason to try in America that doesn't exist in most countries. American workers statistically are the most productive per capita laborers in the world because hard work is generally rewarded. You can go from dorm room to mansion with one good idea. A poor Arkansas boy raised by a single parent can become president. A college dropout can become the world's richest man.

Not only do we enjoy the secret sauce, but we have the mechanisms within our society to protect it. Rule of law (there is one lawyer for every 265 Americans), freedom of the press, and Darwin-like criticism of political, social and economic ideas lead the list.

Our comparative positioning relative to other countries is something many pundits overlook. Look at how we stand relative to other nations. How would you like to have Japan's demographics? China's property rights? Russian rule of law? France's labor flexibility? Or consider that our military expenditures equal that of the next 15 nations combined, that our stock market capitalization is bigger by a factor of three than No. 2 Japan, that our GDP is No. 1 by a factor of two, that among high-income countries, we rank third for new business creation. The list goes on ...

Even if the U.S. is stronger than some pundits suggest, isn't it important to focus on a country's growth rate when investing? It is a common belief that in order to get in on the rapid growth occurring in emerging economies, you must invest into their respective stock markets. Over the past seven years, investors removed $613 billion from U.S.-focused funds while simultaneously depositing $300 billion into international funds. Buying stocks of "The Late Great USA" has now become the contrarian position.

But would it surprise you to know that just as the U.S. meets its supposed "Day of Reckoning," the Indian stock market is up 3 percent year-to-date, or the Chinese market is off 25 percent from its October '07 peak? Meanwhile, the Standard & Poor's 500 index has set new record highs and is up 17 percent year-to-date.

Posted by at June 5, 2013 4:53 AM

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