As I insinuated in my post three weeks ago, the media has a
Given the typical information diet of retirees, making smart financial decisions during the media’s “coverage” of apocalyptic volatility or unbridled mania can be far more difficult than before retirement. After all, your entire life savings is on the line. That is why I believe the ability (or inability) to make rational decisions in the face of irrational markets is the most underappreciated and most ignored variable when planning for retirement. Side note – This is where a really good financial advisor can truly add value.
To be clear, I am a retirement planner that thinks exclusively long-term with regard to equities and therefore readily admit I have no idea what is going to happen next in the markets. I do, however, have an opinion on the current overall health of the market itself and that’s what I’d like to share with you today. In accordance with my principles though, please do not under any circumstances take this post as a market prediction. My hope here is simply to provide a level-headed positive report on the current market and
Much of what follows comes from less heralded sources such as the Federal Reserve Bank of St. Louis, Bureau of Labor Statistics and the American Institute for Economic Research. Unfortunately though, because these sources are not designed for their entertainment value they rarely see the light of day in the mainstream media.
With those caveats out of the way, let’s get to it.
The American Economy
I want to share a few quotes from an American Institute for Economic Research article titled “Straightforward Facts about the American Economy” by Donald Boudreaux :
Industrial capacity in the U.S. is today at an all-time high…Unsurprisingly, therefore, real U.S. manufacturing output is today near the all-time high that it hit in 2007…and it continues to rise.
Despite the fact that America continues to more and more become a service economy, manufacturers in America produce 11 percent more output than they produced when China joined the WTO 18 years ago and 45 percent more than when NAFTA took effect.
Here’s something else that’s high and rising: U.S. exports. Today
theseare 85 percent higher than when China joined the WTO, 200 percent higher than when NAFTA commenced, and nearly 800 percent higher than in 1975.
While it’s true what the media says that gross household debt is at an all-time high (of course they isolate that single data point for their headlines), perhaps more interesting is household debt as a percent of disposable income is the lowest it’s been in 40+ years (see below). Why isn’t this getting any press?
Next, as you can see below, unemployment at 4% is at or near a 50-year low.
But just wait, it gets better…
According to the Bureau of Labor Statistics, for the first
As a likely result, despite what you hear about stagnant wages, real (meaning adjusted for inflation) median income has been trending up over the last 30 years and has increased dramatically over the last four years.
I could honestly go on and on, but I want people to actually read this, so I’ll stop there with regard to America. What do you think so far? Still pessimistic? Next question…
What is happening abroad?
Those are just the numbers for
Nicholas Kristof wrote an opinion piece for the New York Times titled “Why 2018 Was the Best Year Ever.” In it he states,
Each day on average, about another 295,000 people around the world gained access to electricity for the first time, according to Max Roser of Oxford University and his Our World in Data website. Every day, another 305,000 were able to access clean drinking water for the first time. And each day an additional 620,000 people were able to get online for the first time.
Never before has such a large portion of humanity been literate, enjoyed a middle-class cushion, lived such long lives, had access to family planning or
beenconfident that their children would survive.
…in the early 1980s, 44 percent of the world’s population lived in extreme poverty. Now, fewer than 10 percent of the world’s population lives in extreme poverty, as adjusted for inflation.
The data above might seem like it has no connection to the markets whatsoever as I’ve obviously included no specific financial data. But as someone transitioning into retirement, think of the potential impact that new consumers in those quantities could have on a global economy over the next 30 years. It’s almost unfathomable. And this is happening at an amazingly large scale. Every. Single. Day.
Long-Long Term Ideas
Thinking of the long-long-term, I wanted to share a few quotes that sheds light on global potential from Peter Diamandis’s Talks at Google “Exploring Exponential Technologies” discussion. The below quotes are all from just the first three minutes.
I am clear that we are alive during the most extraordinary time ever in human history.
A time when each of us has more power than nation-states had, head of industries had just decades ago.
It’s also true that I think none of us really understand how fast the world is changing. We’re living in a world where technologies across the board are growing exponentially. Computation, sensors, networks, AI, robotics, 3D printing, synthetic biology, AR, VR,
blockchain, all of those technologies are themselves accelerating, but it’s the combination of two, three or four together that are accelerating things.
Add to that the notion that in the next six years, we’re going from 3.8 billion people connected on planet earth last year at the end of 2017 to 8 billion people connected. We’re adding 4 billion new minds into the global conversation who have never been there before. And that’s
a massiveempowerment for acceleration.
Add to that fact that we have more capital available flowing than ever before. We hit all-time highs in venture funding, seed funding, crowdfunding, ICOs, sovereign investments. So more capital flowing at the same time that all the technology that we’re using to make stuff happen is demonetizing faster than ever before.
Imagine the possibilities when these 4 billion people come online to solve problems while at the same time becoming more avid and able consumers.
Despite what we hear on TV, I’ll happily say I believe that one day we’ll look back on this decade as one of the great investment opportunities of all time. And I also believe it will be looked back at as an inflection point for humankind. But my worry is that so many people will miss this opportunity because they are being constantly bombarded by confirmation of their own fears.
Surely this can’t last forever though?
I’m not saying there aren’t issues to overcome as there are certainly concerns worth noting – the polarized political environment, Brexit, carbon emissions, income inequality, and so on. But market headwinds have always been there and always will be there. In any case, I’m also not saying any of this will last forever. In fact, I’ll save you the suspense:
At some point earnings will slow. Debts will increase. People will become fiscally irresponsible. Wages will fall. Domestic manufacturing will slow. These aren’t a matter of if, but when. That’s how it goes – the economy works in cycles. That’s not unusual and it shouldn’t be a catalyst for capitulation. What is going to cause everything to collapse? I honestly have no idea as clarity in investing only comes in hindsight if at all.
I have no idea what the short-term future holds, or for that matter, what the long-term future holds, but I have significant opinions with regard to what I *think* is likely to happen over the long term based on historical precedent and the current economic and global trends. That’s about it – but I find great comfort in the consistent improvements I see all around me.
I just honestly get tired of the doom and gloom that is always being peddled and wanted to provide some counterpoints. The only point I’m trying to make here is that I think that anyone looking at the data with a relatively objective eye would have a tough time finding reasons to be pessimistic in the long-term and that is a story that isn’t told enough.
Thanks for reading!
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Disclaimer: Any opinions are those of Ashby Daniels and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.