April 25, 2019 by Marty Moore, CFP
Where were you ten years ago?
Not just where you were but where you were emotionally as well? Kind of a weird question, huh?
Not to bring back bad memories but a little over ten years ago the U.S. was deep into one of the worst financial periods it had ever experienced in its history. Housing had collapsed, some of the country’s largest banks were on the brink of failure, unemployment was approaching 10%, and the stock market was down over 50% from its previous high. (The “Financial Crisis”, as it is now referred to, is not an overstatement).
Investors were on edge… to put it mildly.
So, I’m sure you can remember where you were and, with a little prompting, I bet you can also remember where you might have been emotionally as well.
My apology for bringing up what, for many of us, myself especially, was a not-so-pleasant period of time, but I wanted to provide an intro to Brian Wesbury’s Monday Morning Outlook, published on March 11.
Ten Years Ago
By: Brian Wesbury
It’s March 8, 2009. The market’s down 56% from its all-time high, unemployment is over 8% and hurtling toward 10%, it’s just been reported that real GDP dropped at a 6.2% annual rate in Q4 of 2008, and it feels like the world is coming to an end. You’re tired, exhausted from living through this, and you fall into a deep sleep. So deep, in fact, that you don’t wake up until today, 10 years later.
First thing you do is run to your computer and see the S&P 500 is up 305% since the bottom. You are blown away. No way this could be true! Things were so bad when you fell asleep. Little did you know the S&P 500 bottomed the next day.
So you run over to your friend’s house and knock on the door. Your friend answers, wondering where you’ve been for 10 years! You ask what possibly could have happened to drive the stock market up more than 300%.
Your friend pulls out a list. Let’s call them the “golden geese.”
After-tax economy-wide corporate profits are at record highs, up 175% since the bottom, or around 11% annualized growth.
Then your friend tells you about Apple. When you fell asleep, Apple had been selling the iPhone for about a year and a half. Over that period, they sold a record-breaking 17.4 million of them. But since you’ve been asleep, Apple has sold about 1.3 billion of them. Every calendar quarter Apple sells about three times what it sold in that first year and a half.
Then there’s Uber. Your friend tells you how you can press a button on a phone and a few minutes later a car will come by and, before you get in, you know who the driver is, his rating, how much it’ll cost, and how long it will take to get to your destination. All cheaper than a taxi. It seems like science fiction!
You see unemployment is only 3.8% and think it’s a typo, because when you fell asleep it was more than double that.
Your friend shows you a video of a self-driving semi-truck that Budweiser used to carry 51,744 cans of beer from Fort Collins, CO, to Colorado Springs, CO. About 130 miles on I-25 with no driver! Now Amazon is deploying similar trucks.
But what may be most amazing is that that there have been several years over the last 10 that the US has run a trade surplus with OPEC. You wonder how this can be since the US was in an energy crisis when you fell asleep. In fact, oil production had been on a declining trend for about 50 years. Your friend tells you it’s all changed. Since you have been asleep, because of new technology, oil production has more than doubled, from about 5 million barrels per day to around 12.1 million barrels per day. In fact, the US is now the world’s biggest oil producer. Bigger than Russia and Saudi Arabia! The state of Texas, by itself, just surpassed Iran to become the world’s fifth biggest oil producer!
You continue through the list and are more and more blown away. It’s been only 10 years and the world is completely different, for the better! You barely recognize it, so many things have happened that you wouldn’t have even dreamt possible.
And notice, you have no idea who is President, what’s been going on with interest rates, Quantitative Easing, China, or North Korea. You’ve never heard of “AOC” and you missed the whole Greek debt crisis. All you know about are these “golden geese.” And that’s all you need to know. The entrepreneur, alive and well, has continued to revolutionize the world over the past 10 years. That’s what has been driving economic growth and the stock market.
Imagine where we will be 10 years from now. Our guess is that it will be better than you can think.
(Brian Wesbury, First Trust Economics Blog, March 11, 2019)
So how did all this happen?
Yes, the entrepreneurial spirit is alive and well. Our system of capitalism is far from perfect but it has produced the most vibrant, dynamic and productive economy the world has ever known. Consider the chart below.
From: Merchant Machine, merchantmachine.co.uk
The map shows the world divided into four regions each with the same GDP (Gross Domestic Production).
The economic output of the U.S. is as big as all of Western Europe, plus Canada (green). It’s as big as China, Japan, and South Korea put together (yellow). After these countries and regions, it’s as big as the rest of the world which includes Russia, India, Brazil, Australia, Africa, Latin America, the Middle East, Eastern Europe and Southeast Asia (red). Amazing!
And finally… We all can use good advice
As always, thanks for reading.