Why I'm Bullish on America's Future
Aug 05, 2011 |
This article published with permission from InvestmentU.com.
Even though the deal got done, simmering American debt, spending challenges and the soft economy seem to have unnerved many investors in the past few days.
The “America in decline” message, coupled with China hype, has made perspective and balance a rare commodity.
How bad is it? A recent study by Pew Global Attitudes showed that 15 of 22 nations believed that China has or will replace the United States as the world’s leading superpower. This pessimistic view of America and unrealistic view of China is held by 46% of Americans and 63% of Chinese.
This view was clearly on display during an investment summit I recently spoke at in Seattle. Pessimism regarding the future of America was palpable while interest in fast-growing emerging markets was sky high.
I have to admit up front that I’m very bullish on America’s future.
There will always be some sort of crisis facing any country, and the key is to find a way to fight through it and figure out how to prosper.
Beware the enemy of sound financial planning
Think of the black days of World War II as London was pounded by the Luftwaffe and an invasion by the Nazi machine across the channel was expected any day. Sir Winston Churchill’s advice to his fellow Brits was short and on the mark: “Keep calm and carry on.”
This is great advice for American investors worried about the country’s future. The risk of letting our emotions override common sense is the enemy of sound financial planning.
The first day of the summit in Seattle, my talk on strategies for investing in emerging markets was well received. The second day, I turned the tables and spoke about America’s strengths versus emerging markets.
My goal was to even the scales a bit and rein in pessimism about America’s future, as well as dampen the sentiment that China is poised to take over the world.
Eight reasons why America has a bright future
I have to say, when people realize how much potential our country has, they become very energized.
And why not? The United States has a bright future — despite the pessimistic commentary. Here are just a few bullet points that will hopefully keep you from getting carried away by all the negative stuff on America out there in the media.
1. America is still the leading manufacturer in the world, with 22% of global manufacturing primarily in advanced, capital intensive manufacturing. American manufacturing workers are eight times more productive than Chinese workers.
2. The American economy is still three times the size of China’s, even though its population is about one-fifth its size.
3. The market values of Exxon and Apple alone are greater than the market value of the entire Shanghai stock market. America’s multinationals are dominant, representing 47 of the world’s 100 largest companies by market value. Meanwhile, 15 of China’s 20 largest companies are owned and run by the Chinese state.
4. America is the world’s third-largest exporter (just a hair behind China and Germany) and its upside potential is enormous. Only 2% of America’s small- and medium-sized businesses export at all right now. About two-thirds of our trade deficit is due to Chinese and energy imports.
5. America remains the world’s agricultural king, accounting for 20% of global trade. It has twice the arable land of China (which is 25% desert) and its farms are the most productive in the world. By contrast, 60% of India’s people are in agriculture, but the sector accounts for only 15% of gross domestic product. About 40% of India’s crops spoil on the way to market due to poor infrastructure.
6. The United States has 28% of the world’s coal reserves and Louisiana alone has four times the proven natural gas reserves of China. The United States has twice the fresh water of China while China’s annual carbon emissions are already twice that of America.
7. America is still the number one destination of foreign direct investment. On a cumulative basis, it has four times that of the U.K. and six times that of China.
8. America continues to play its role as a global talent magnet. Fifty-two chief executive officers of S&P 500 companies and 72 CEOs of Inc. 500 companies are foreign born. About 30% of Silicon Valley start-ups were founded by immigrants. Let’s keep it going.
America’s ace in the hole
China has been, and will hopefully continue to be, a great growth story for investors, but don’t get carried away and remember to manage the risks. America, like every country, has its economic challenges, but it’s hardly on its last legs. It has tremendous strengths and its ace in the hole is its open and flexible economy and society.
So ignore the “America is over” crowd. Keep calm and continue to carry on with American stocks at the core of your well-diversified global strategy. And to get the ball rolling, next week I’ll give you five reasons that IBM has to be in your portfolio.
Carl Delfeld is a senior analyst at InvestmentU.com. See more articles by Carl here.