posted on 20 July 2016
by Elliott Morss, Morss Global Finance
For different reasons, the media and politicians paint a pretty grim picture of the US. The media makes more money when covering distressing events. And politician running for office put a negative spin on today's conditions, saying things will improve if they are elected. But what is the reality? Relative to most other countries in the world, things are great in the US. I attempt to document this below.
I quote from John Reese of Validea, one of my favorite economics and investment gurus:
In short, the economy continues to grow steadily. Sure, there are not as many cushy "middle class" jobs as there used to be, largely because of labor saving innovations, but the US is close to "full employment".
On top of this, there is no country in the world that has the infra-structure in place to commercialize good ideas as the US. The US stock market? Over the last year, it is up 4.5%.
Table 1 indicates how the US doing relative to other nations. Leaving aside China and India, there is no major country in the world growing as rapidly as the US. And unemployment? Relative to other G7 countries, the US is in excellent shape.
Table 1. - GNP Growth and Unemployment Rates, Selected Countries and Regions
Indeed, there is a small US segment earning outrageous amounts of money - $1 billion+. But it is a very small segment. And US citizens have always been reluctant to curb what individuals can make.
Guns, Mass Shootings, and Radical Groups/Individuals
The media has really taken off on this topic: be the first on the scene, interviews with law enforcement, extended searches into the killers' backgrounds, and talks with the bereaved. These events really sell, and the politicians have had a great time....
But what are the realities? Table 2 gives US data on shootings for this year and the prior two years. The US is one of the few countries in the world where citizens are allowed to own guns. International data show that gun deaths are highly correlated with the availability of guns. Accordingly, there are far more gun deaths in the US than in other nations.
It is certainly true that social media and cable news have provided emotional support for troubled individuals to go out and kill people. However, even with the news of increasing violence resulting from radical groups and racial problems, total gun deaths have increased, but only slightly. And when you look at how radical groups are causing problems elsewhere, the US should be far from the panic mode. However, the media and out-of-office politicians love it: good for ratings and politicians get to blame the in-power politicos.
Table 2. - US Non-Suicide Shootings
Source: Gun Violence Archive
* Nearly twice as many people use guns to commit suicide than to kill others.
Politicians running for office base their campaigns on claims citizens' lives will improve when they are elected. The politicians rarely provide details on how this is going to happen. And what they do offer makes little sense, e.g. a 45% tariff on Chinese imports.
The effect of these claims is to make citizens think that without lifting a hand, their lives will be better if they elect whomever. But what is the reality? Trade barriers will not work. The world is a competitive place. Efficient countries with hard-working citizens will prosper.
The greatest threats to continued US prosperity are foreign uncertainties:
There are ways that each of these problems could be resolved in a reasonably satisfactory manner. But it is highly unlikely they all will. And the media will continue to exaggerate disasters whenever they happen.
As mentioned above, the US stock market is doing well. But foreign uncertainties will continue to cause considerable volatility. In light of this, I look for investments with healthy dividends (4-5% range) and low payout ratios. Do your own research. Among my current favorites: Valero (VLO), Xinyuan Real Estate (XIN), and Brookfield Property Partners (BPY).
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