Why I’m Bullish on America’s Future
by Carl Delfeld, Investment U Senior Analyst
Thursday, August 4, 2011: Issue #1571
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 percent of Americans and 63 percent 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.
- America is still the leading manufacturer in the world, with 22 percent of global manufacturing primarily in advanced, capital intensive manufacturing. American manufacturing workers are eight times more productive than Chinese workers.
- The American economy is still three times the size of China’s, even though its population is about one-fifth its size.
- 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.
- America is the world’s third-largest exporter (just a hair behind China and Germany) and its upside potential is enormous. Only two percent 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.
- America remains the world’s agricultural king, accounting for 20 percent of global trade. It has twice the arable land of China (25 percent desert) and its farms are the most productive in the world. By contrast, in India 60 percent of people are in agriculture, but the sector accounts for only 15 percent of GDP. About 40 percent of India’s crops spoil on the way to market due to poor infrastructure.
- The United States has 28 percent 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.
- America is still the No. 1 destination of foreign direct investment. On a cumulative basis, it has four times that of the U.K. and six times that of China.
- America continues to play its role as a global talent magnet. Fifty-two CEOs of S&P 500 companies and 72 CEOs of Inc. 500 companies are foreign born. About 30 percent 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 manage the risks. America, like every country, has its economic challenges, but is 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.
Good investing,
Carl Delfeld
Any investment contains risk. Please see our disclaimer.
35 Responses to “Why I’m Bullish on America’s Future”
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Carl,
Article on “Keep Calm” — well said , thank you. Appreciation you taking the time to write this article.
Gord
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Thank you so much for your article. I think that we need to unite together for America instead of the divisions that the media and politicians have created. We need a leader to tell us all the positive messages that politicians in the past would tell their people, such “Keep calm …”, “the only thing you have to fear is fear itself”, etc. We don’t get much of that these days. We only get the blame and bad-mouthing of the other party from our leaders so that they will get elected again. They need to work together for us the people – We should fire them all. And even with all of our problems, I believe America can rise and be strong again. But it is true that “United we stand, divided we fall.”
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Carl,
I disagree with the premise of your article. Unfortunately, all empires rise, plateau, and then decline. We are witnessing the decline of the American Empire. This nation is consumed by debt. Forget the 14 trillion; the real debt figure is 1.5 quadrillion. This is an amount that can never be paid back. I agree with Jim Rogers, the United States the largest debtor nation in the world.
Concerning China, the 21st century is the Chinese century. In contrast to the United States they are the largest creditor nation in the world. Once their economic reforms are complete and their market evolves from a largely exporting economy to an internal comsumption economy they no longer need the United States. I believe this century will see a gold back RMB replacing the USD as the world reserve currency.
There are other facts which bolster my views but this should suffice to get my point across. Is America over tomorrow? The obvious answer is no. In the long term America is will end up like Britain as the worlds wealth and power shift eastward.
Thanks,
Rob
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Live in China for a few years and maybe your comments about China might be different. My wife and I were there for 5 years (2005-2010) setting up and running a manufacturing company. The corruption, wealth divide, ME focused society, that is controlled by the largest mafia in the world…the “communist party”…is suffocating the poor, killing off their future through incredible greed, pollution beyond comprehension, societal repression that you only see when you live there.
We have our very big problems but I am still proud to be an American and living in this country.
Try living somewhere else for a few years and then let’s see if you have the same opinions about America…money is not the only thing that makes a country and its people great.
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This is curious. Today, I sold 8 stocks I had trying to save my profit rather than give it all back. With the market dropping like a rock, when I put in my sell orders on several thousand shares, they all sold instantly! That tells me there are still a lot of buyers out there.
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Carl, you are afficted with “normalcy bias”. The old America is the new Amerika. Yes, we still have manufacturing and good Americans but government strength is increasing, the gov is broke, liberties are disapearing faster than donuts at a policemen’s party. We are like an alcoholic; things will only get better AFTER the crash. It will be a big crash and America may not be back for 10 or more years.
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Fundamentally, USA still has certain advantages as noted. But plenty of problems we all know. And short term if going long, can lose a lot of money in stocks, and have to pray long term the market comes back.
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Great Article. We have too much Gloom & Doom. What we possibly need is some re-alighment and less government. The USA is still “The Best”. We still have one way flights “out”, but people are fighting “to come here”.
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Amen to that!
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The problem is political. Take a look at the Presidency, the Congress, the 50 Governors and State Legislatures. The competency level is at an alarming low, primarily because public service no longer appeals to the best and the brightest.
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Thanks for a pretty good, and, after a day like today, very much needed, pep talk. Of course, many dark days may be ahead on the way to better days, but… hope springs eternal.
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how dare you challenge “the sky is falling” with facts!
great piece, great perspective.
in a world where I print nothing, I printed this
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Thanks for the positive news .Why aren’t we getting this info from mainstream press.Instead of the sky is falling.We need a real leader at the head of the table.
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Couldn’t have been better said Carl. Completely agree. People also tend to forget that the vast majority of inventions in the world in the past 200 years have come from the US and continue to do so. No other country in the world has so much influence on everybody else’s daily lives. But most of all, no other country in the world shares their knowledge with the rest of the world. Russians, Chinese, Japanese, other Asians, Arabs, South Americans, Africans don’t teach or share their knowledge. Some European countries may be an exception. I’m a great admirerer…….
Regards,
Juan Ospina
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I lived in China for many years and there is so much corruption that Americans have no idea about. 2nd, you can’t trust the accounting in China, and many of the numbers stated by the local and central governments are grossly overstated.
When it comes to reporting GDP, whether local or national, the numbers are usually rigged, and China has a horrible problem with government officers stealing funds (over 1 trillion RMB) and running away to other countries. This is very common! While most Chinese are aware of this, Americans seem totally ignorant of this.
If you give most Chinese a chance to immigrate to America or Europe, they will. For instance, a few of Deng Xiaoping’s kids are American citizens, and one of Mao Zedong’s grandchildren is an American citizen, and let’s not forget countless other elite figures family immigrating over seas.
Sure America has lots of debt, but China is not doing much better in real terms and in many ways, China is actually doing worse.; therefore, I don’t buy this “End of America” argument. Most of these people writing these “end of America” articles know nothing about China and have only been to the touristy and rich areas in major cities. These people have no idea how common people live, work, and struggle, let alone the difference between rich and poor.
For those who don’t believe me, I suggest you read about Chinese history. In 1890, China was the world’s number one economy. While I could go on all day writing this, here is a great strength America has over China, open mindedness and flexibility, especially politically. Like I said, read your history books!
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Carl, I certainly appreciate your “Keep Calm…” message. I, too, believe in America’s future. Thanks for the facts you quoted. My online broker said there had been insider trading on four of my stocks. Even so, I only am selling one of those. I have been intending to sell it as it has never had a gain since I bought it. Thanks so very much!
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I cannot believe that you did not even address the debt or deficit issue. What about those, Carl? America may have 22% of global manufacturing but it is slipping fast and it is only 3rd place in exporting. That means that most of its manufacturing has been for domestic consumption, and when you consider the REAL level of unemployment, that consumption is going to slide drastically in the next year. And when you say USA’s economy is 3 times the size of China, just consider the debt factor, Carl. Would you be investing in a business that has had the number one spot but is for all intents and purposes, on the financial statements, bankrupt? Or would you invest in a business that was number 2 and growing fast, with no debt and huge cash reserves? Well it’s no different with USA vs China.
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Thank goodness for a voice of reason! It often sounds if media commentators are talking the US into a recession!
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Carl, It was so nice to finally hear some positive about the United States. I wasn’t aware of a lot of this information. Thank you for making us aware of it!
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America is going to become the next Argentina of the world.
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Thanks, Carl, for this helpful counterbalance to the “end of America” mentality now rampant.
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Hi Carl,
I receive your news letter regularly and enjoy your insights.Thank you and keep up the great work.
Concerning market cap of Apple etc…..Did you know that Apple have got more cash on hand than the American Federal Reserve has got cash?
I admire the USA but it doesn’t say much for the really poor administrative abilities of the political leadership….You gotta love politicians
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It is refreshing to read this article . I hate the permanent doomers.
Eva Friesecke
Swizerland
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America is broken not totalled. It needs to do a few things to regain its position as HEALTHY super power.
1) reduce the size of government.
2) elect a “f#@k you” president who makes all the unpopular decisions needed to fix the country and doesn’t care if he serves only one term and doesn’t spend that term trying to win votes for a second term. In other words a president who will fix what’s broken within 4 years and then be prepared to walk away because less than 50% of the voters will like the taste of the medicine. If he or she is lucky and very good he might get to serve 2 terms after all much like Ronald Reagan did in his day.
3) Bust a few of the unions whose outright greed has done most to destroy american productivity and jobs.
4) Introduce a VAT or GST type of tax (like the UK and Canada) which will eliminate the deficit, and balance the budget,
5) Reduce military spending and redeploy that money to repair America’s completely broken infrastructure. That will put hundreds of thousands of Americans back to work and instill a sense of “Can Do” pride that has been missing far too long.
6) Introduce the necessary banking regulatory controls (much like Canada) to prevent the debacle that occured in 2008 from ever happening again.
In the meantime we do need cheer leaders like Carl but resting on previously earned laurels is not going to do the trick to restore American greatness – quite the contrary.
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Blame the unions? Really, you don’t think corporate greed and financial equity investment has done more damage over the years? Corporate executives share of the pie continues to grow at an alarming rate – while rank and file employees who actually create the wealth in the company shrinks every time the financial outlook looks glum (corporations use this glum perspective to their advantage to goad workers into accepting less money for more work, or cutting jobs – even though they may be perfectly healthy businesses). The way executives and equity investment are allowed to operate and manipulate stock prices to line their own pockets is sickening. There are numerous examples of using the financial and political system to get rich and completely ruin an underlying company to cash out (even in sectors such as elder care – that is sickening). This happens more than you know. The corporations have so much influence in the U.S. politics, they are essentially writing the laws – that my friends is also called corruption (the U.S. is anything but immune – lobbying is just institutionalization of corruption, because it tends to displace true representation of the people with representation of monetary interests that fund campaigns).
The unions aren’t ruining the U.S. economy, they give buying power to U.S. Citizens and generated the underlying basis for current wages and consumerism.
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I didn’t say that corp greed did not need to be addressed. Quite the opposite as you will see if you read my 6th point again. But don’t think that the rank and file create the wealth in corporations. They don’t – the wealth creators are the entrepreneurs who take the chances, who put “skin” in the game and who hire the rank and file to execute the business plans that these real visionaries develop. Corruption? Sure there’s corruption and that’s why you need more regulatory bodies a la canada to address the situation but the avarice you suggest business leaders possess, has in large measure been caused by one for all and all for one completely un-democratic unions, which by the way have more than their share of corruption both at the top and throughout their rank and file.
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USA will not go down the gurgler with their huge corporations,the competitive Americans and their cutting edge R&Ds.
I worked with them never lived there and those I deal with are go getters and well focussed people.
It is the people that make a great nation and Americans can and will overcome this short term problem.
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Carl,
An absolutely GREAT, refreshing article to keep matters in perspective.
While we presently have a near-total lack of political leadership, I somehow believe that the American public is finally waking up to the realities of where the present course is leading and will do what is right in upcoming elections.
Hope I am right! Keep up your fine work!
Old Lyme, CT
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the one thing you left out are the millions of jobs that have went overseas never to come back. the real unemployment rate is probably 18 to 20% once someone loses their unemployment benefits and are dropped from the rolls they are considered “employed” even if they have no job. Fake numbers equal fake facts. with Washington” accounting you can make numbers say anything
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Reading the article and the dissenting responses brings me to summarizing conclusion. It is not American companies or America that has the problem in America. After all, Exxon Mobil or Apple or Microsoft has a lot more cash than debt. So when we talk about debt, it is the American government that has too much debt and too many expenses. When we look at our business leaders like Steve Jobs and Bill Gates, we see compentence and vision. When we look at our political leaders (please do not get me started on Ms. Pelosi, and yes, I am from Northern California and San Francisco politics are funnier than the cartoons), we see bumbling idiots. So I agree with the article, but we have got to do something about our government. Thomas Jefferson, we need you?
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Carl. Did it ever crossed your mind, that we have a government, which is not obviously motivated by saving this country the way it was founded? If changing this society requires economic destruction, socialists will do it and blame it on Capitalists (even as they coerse them and encourage them to be “greedy”). Housing bubble anybody? Economy is only responding to current politics regardless what possibilities USA has. Without radical political change back to our roots is this country over and done with. Poor will suffer as well as rich. Economic problems will deepen and will bring bigger problems. So, as an investor and somebody who wants to survive without leaving this country, I can not ignore the cause of our economic decline. No doom here as long as this country removes the sizeable problem in the next and followimg ellections. Then we can finely use our potential you correctly noticed. So…, it depends on media and electorate and there is no need to be pessimistic when I consider their past performance, right?
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I have been going to China and investing there since 1994. I still go there once a month. People who write or speak about China over-taking USA don’t know what they are doing but are overly influenced by hype and hyperbole. China has already overtaken USA in certain areas and will overtake USA in more areas, but a true superpower that overtakes USA in education, science, technology, systems control & planning, military powers, etc. is not even on the long-term horizon.
America is great but it is a country that is being ruined by a dysfunctional political system. It is a country that has lost its way. You need to look up and look around at the countries all over and see what you can pick up from each place that works. Adapt & innovate as you have always done. Just as you should not believe in the hyperbole that America is gone, you should not believe that USA is so smart that you can’t learn anything from other countries. And avoid getting buried in arguments about being ‘socialists’ or ‘capitalist’, focus instead on making America great for all levels of your society.
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The author sort of stretches the numbers a little bit and doesn’t mention other factors. First of all, China is closer to four times the population of the US and the US economy is closer to twice the size of China rather than three times (once the 2011 numbers come out). And when you consider PPP, China’s GDP is closer to 80% of the US. And when you get to the very basics, China is building more infrastructure, annually, than the rest of the world combined. As far as productivity, etc. Well, productivity is more of a relative term as measured in dollar value. China still relies on labor. So, per hour worked, Chinese industries bring in less revenue. So, as China moves up the value chain, per hour worked will bring in more revenue. And China has nowhere to go but up. And the gap will continue to grow. So, in terms of productivity, I hardly think an American worker can sew clothes faster than a Chinese worker that would make a noticeable difference. So, in the end, it’s all about what you produce.
Also, historically, debt, especially when you get to 100% of GDP, slows an economy down. So, while the US economy will continue to have innovative companies like Apple computers, the overall economy will have slow growth for many years to come, China will continue in the high single digits for many years to come.
And depending on what resource one looks at, China is the largest manufacturer. And if she isn’t as of 2010, she definitely will be this year or the next and by 2020 be much larger than the US. China’s manufacturing workforce is many times larger. As its manufacturing shift to higher value products, her market value will only go up commensurate with her manufacturing workforce. Americans will continue to innovate, of course, much more so than China. But we are going to see the rise of China in manufacturing that will eat away and higher value good produced not only in the US, but the rest of the developed world.
Make no mistake about it, China is the next economic super power. And America’s debt crisis will only expedite it.
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THE CHINA BUBBLE
Thank you Carl for this article. I am often asked why I believe in America and this information is helpful. I do not buy the China hype and we do not believe the China Hype. Regardless of the rhetoric, they have too few kids to sustain this growth for another 25 years. America has an echo boom of kids and like the dramatic increase in growth from the baby boomers, this will happen again.
I am one of those immigrant CEO’s to which you refer in your article. As a relatively new American (2004) I did not immigrate to China or Europe because I believe in the American system. It has a cold and it will recover. The debt is an issue but as before America will surprise the world with her response. She is slow to act sometimes but in the end she will.
China has not begun to face their social economic issues when their people decide they actually want a life and not be part of a command economy. They will face the all the problems developed nations have faced and then we will hear the noise in the opposite direction.
Many private equity groups have chosen not to invest in China. They are receiving all the criticism that Warren Buffet received when he did not invest tin the tech bubble. Serious people accused him of missing the boat. When the tech bubble popped, he was a genius. The same will happen when the China Bubble pops.
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It is good to see a positive article about America’s future. Chinese economic data can’t be trusted as several people have pointed out.
America’s problems arose when the people bought the lie that it was government’s role to take care of them and take income from some rich people to redistribute it to others. INCOME & WEALTH REDISTRIBUTION = THEFT.
By what authority do central planners redistribute anything they didn’t create? I can’t find it in my copy of the Constitution. FREEDOM FROM WANT IS NOT A RIGHT. A TRUE RIGHT TAKES NOTHING FROM ANYONE ELSE. A job is not a right. Healthcare is not a right. Shelter is not a right. All the poor people in the world are not worth the loss of any of the rights listed in the Bill of Rights. If a superman could end poverty by sacrificing our Bill of Rights, it would not be worth it.
NO REAL PROOF EXISTS THAT RICH PEOPLE TOOK ANYTHING FROM ANYBODY ELSE.
Too many Americans have a sense of entitlement. A strong entitlement mentality is a virtual guarantee of WELL DESERVED personal failure. It also causes the downfall of societies. That is what the European social democracy welfare state model is teaching us.
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