VIDEO: Never Bet Against America (and Other Investment Wisdom)
Welcome to my latest video presentation. Below is a transcript that I’ve edited for concision and clarity.
I’ve been in the publishing business for 40 years, and throughout those decades, I’ve heard the same old whining from the perpetual gloomsters: America is in decline. Our society is falling apart. The U.S. dollar will get dethroned. Our manufacturing base is hollowed out.
During the 1980s, the Japanese were supposed to dominate the world. Didn’t happen. Now, it’s supposed to be the Chinese. I submit to you that the Chinese won’t take over the world, either.
I turn your attention to super-investor Warren Buffett. The “Oracle of Omaha” currently has a net worth of $113.5 billion, so he must know what he’s talking about. And here’s what Buffett once said: “Never bet against America.”
As we contend with the pandemic’s aftermath, inflation, rising interest rates, geopolitical strife, and the Russia-Ukraine war, Warren Buffett’s dictum is more apt than ever.
Stay invested and position your portfolio for the new secular bull market that’s sure to come. Right now, I favor U.S.-based large cap stocks, especially in the tech sector which was beaten down in 2022 and but now appears to be in the midst of a comeback (see my video for details and charts).
America already is great…
The prestigious Economist magazine on April 13 published a report on America’s economic performance over the past three decades. From my perspective, here are the seven most salient findings:
- Today, America accounts for 58% of the G7’s gross domestic product (GDP), compared with 40% in 1990.
- In 1990, U.S. GDP per capita was roughly equal to that of Europe and Japan. The U.S. is currently far ahead of both at about $80,000, compared to $39,000 for the European Union and $36,000 for Japan (approximate figures, in U.S. dollars).
- In 1990, American income per person was 24% higher than the income per person in Western Europe. Today, it’s about 30% higher.
- The U.S. accounts for 22% of the patents in force abroad, compared to 19% in 2004.
- American labor productivity increased by 67% between 1990 and 2022, versus a 55% increase in Europe and 51% in Japan.
- To be sure, China has racked up phenomenal growth over the past three decades, to surpass Japan as the world’s second-largest economy. But keep this in mind: In 1990, America’s economy accounted for about 25% of global GDP and in 2022 it still accounted for about 25%.
- In 1990, if you had invested $100 in the S&P 500 (which after all is an index of American companies) you would have about $2,300 today.
A re-cap of the past week…
First-quarter corporate earnings results have been a mixture of good and bad news. The largest U.S.-based banks started the Q1 season with a bang, but as other companies and sectors reported operating results, the bang has turned into a whimper.
The latest economic reports have been a mixed bag as well. Business activity in the U.S. private sector expanded at a strengthening pace in April, with the S&P Global Composite Producer Manufacturers Index (PMI) rising to 53.5 (flash) from 52.3 in March.
However, the Fed’s “Beige Book” last week described job gains in early April as “moderating somewhat.” The report indicated that consumer spending, factory activity, and construction activity were either flat or down slightly this spring.
These crosscurrents dragged down U.S. stocks, with the main indices finishing last week in negative territory. The Dow Jones Industrial Average fell -0.2%; the S&P 500 fell -0.1%; and the tech-heavy NASDAQ fell -0.4%. The benchmark 10-year Treasury yield rose 0.1% to reach 3.57%. Crude oil prices fell -5.6%.
The end of the Fed’s rate tightening cycle is in sight, which means the cyclical peak in long-term yields was reached last year.
It’s telling that the tech sector has been outperforming lately, a sign that investors are looking ahead to the normalization of interest rates and faster economic growth. This week, earnings reports from Big Tech will occupy center stage, and the numbers are generally expected to be at least respectable.
The week ahead…
In addition to earnings results from the mega-cap tech companies, the following economic reports will garner Wall Street’s attention:
S&P Case-Shiller home price index, new home sales, consumer confidence (Tuesday); durable goods orders (Wednesday); U.S. GDP, initial jobless claims, pending home sales (Thursday); personal income, personal spending, consumer sentiment, and personal consumption expenditures (PCE) price index (Friday).
The biggest report this week will be the PCE numbers. PCE, specifically the core measurement, is the Fed’s favored inflation gauge because it provides a more comprehensive picture of costs for consumers than other metrics, such as the consumer price index (CPI).
The most recent inflation reports have pointed to cooling inflation. Friday’s PCE reading is expected to show a continuation of deflationary trends.
In the meantime, if you’re hunting for high yields, but you also want to mitigate risk, consider my colleague Nathan Slaughter, chief investment strategist of High-Yield Investing.
As a high-yield expert, Nathan has devised a simple strategy that could help you generate a steady stream of cash. In fact, he has come up with several “bulletproof buys” that are suitable for investors of all types. Click here for details.
John Persinos is the editorial director of Investing Daily.
To subscribe to John’s video channel, click this icon: