Once upon a time, the United States had the largest and most prosperous middle class in the history of the world. But now America's middle class seems to be vanishing at a blinding pace.....
At least that is the outlook from the Business Insider which recently published 22 statistics that "prove" the American middle class is being systematically being wiped out.
Here is a brief rundown of the most alarming statistics pulled together by Business Insider:
1) 83 percent of all US stocks are in the hands of just 1 percent of the population.
2) 61 percent of Americans "always or usually" live paycheck to paycheck. This is up from 43 per cent in 2007.
3) 66 per cent of the income growth between 2001 and 2007 went to the top 1% of all Americans.
4) For the first time in US history, banks own a greater share of residential housing net worth in the United States than all individual Americans combined.
5) In 1950, the ratio of the average executive's paycheck to the average worker's paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 and 500 to one.
6) The top 1 percent of US households own nearly twice as much of America's corporate wealth as they did just 15 years ago.
7) The top 10 percent of Americans now earn around 50 percent of our total national income.
8) Approximately 21 percent of all children in the United States are living below the poverty line in 2010 - the highest rate in 20 years.
9) There are now 6 unemployed Americans for every new job opening.
10) The average federal worker now earns 60% more than the average worker in the private sector.
Why is this happening? A lot of it is related to what I discussed in last week's article and the abnormal growth of the financial sector.
The growth of the financial sector and government together have, like weeds, strangled the growth in the once-vibrant sectors of the US economy. For instance, sectors like manufacturing...I have yet to see anywhere around the world a healthy economy that does not have a vibrant industrial and technology backbone.
Sadly, the elites in the government and financial sectors continue grabbing more and more of the no-longer growing US economic pie, starving the other key economic sectors.
Saturday, July 31, 2010
Saturday, July 24, 2010
The Financial Sector Goes Rogue
Jeremy Grantham is chairman of the board of asset management firm GMO. He is also an astute investor with an impressive long-term track record.
And it seems he is also a keen observer of the American economy and what has gone wrong with it over the past few decades. His latest quarterly letter to shareholders is very interesting, especially considering it comes from someone in the financial industry.
In the letter Mr. Grantham argues that a disproportionate share of the US economy is devoted to financial services.
He points out that back in 1965 financial services made up only 3 percent of our nation's economic output (GDP). He says that clearly this was sufficient with the proof being that the decade was a strong candidate for the best decade economically for the US in the 20th century.
Therefore, he says, Americans should be highly suspicious of the extra 4.5 percent of the economic pie that went to the financial services sector by 2007, bringing the total to a remarkable 7.5 percent of GDP.
Mr. Grantham said this extra 4.5 percent would seem to be WITHOUT material benefit except to the recipients on Wall Street and elsewhere in the financial services sector.
He said it is a form of tax on the remaining REAL economy and would reduce its ability to save and invest for the future. He argues this would reduce the growth rate of the non-financial sector of the economy.
And indeed it has. Before 1965, the non-financial sector grew at a 3.5 percent rate per year...between 1980 and 2007, this rate of growth had slowed to an annual rate of only 2.4 percent.
Mr. Grantham didn't stop there in his criticisms. He said "This bloated financial system was also increasingly deregulated and run with increasing regard for profit and bonus payments at ALL costs."
He certainly hit that nail on the head.....
Mr. Grantham also decries the 'Age of the Trader'. The following excerpt is spot on:
"I grew up in a world where stocks and other financial instruments were traded by the client with a high degree of trust in the agent (Wall Street). Somewhere along the way, without any formal announcement of the change, the "client" in a trade mutated into a "counterparty" who could be exploited. Steadily along the way, the agents' behavior became more concerned with the return on their own capital than with the well-being of their clients."
Thus we have Goldman Sachs and other big Wall Street firms having no problem with ripping off clients and setting off "suitcase nukes" all over the globe in the form of bad mortgage bonds as long as they made a healthy profit while doing it.
Mr. Grantham argues for more regulation to rein back some of Wall Street's practices. A pity we didn't get that in the recent "financial reform" legislation passed by Congress.
And it seems he is also a keen observer of the American economy and what has gone wrong with it over the past few decades. His latest quarterly letter to shareholders is very interesting, especially considering it comes from someone in the financial industry.
In the letter Mr. Grantham argues that a disproportionate share of the US economy is devoted to financial services.
He points out that back in 1965 financial services made up only 3 percent of our nation's economic output (GDP). He says that clearly this was sufficient with the proof being that the decade was a strong candidate for the best decade economically for the US in the 20th century.
Therefore, he says, Americans should be highly suspicious of the extra 4.5 percent of the economic pie that went to the financial services sector by 2007, bringing the total to a remarkable 7.5 percent of GDP.
Mr. Grantham said this extra 4.5 percent would seem to be WITHOUT material benefit except to the recipients on Wall Street and elsewhere in the financial services sector.
He said it is a form of tax on the remaining REAL economy and would reduce its ability to save and invest for the future. He argues this would reduce the growth rate of the non-financial sector of the economy.
And indeed it has. Before 1965, the non-financial sector grew at a 3.5 percent rate per year...between 1980 and 2007, this rate of growth had slowed to an annual rate of only 2.4 percent.
Mr. Grantham didn't stop there in his criticisms. He said "This bloated financial system was also increasingly deregulated and run with increasing regard for profit and bonus payments at ALL costs."
He certainly hit that nail on the head.....
Mr. Grantham also decries the 'Age of the Trader'. The following excerpt is spot on:
"I grew up in a world where stocks and other financial instruments were traded by the client with a high degree of trust in the agent (Wall Street). Somewhere along the way, without any formal announcement of the change, the "client" in a trade mutated into a "counterparty" who could be exploited. Steadily along the way, the agents' behavior became more concerned with the return on their own capital than with the well-being of their clients."
Thus we have Goldman Sachs and other big Wall Street firms having no problem with ripping off clients and setting off "suitcase nukes" all over the globe in the form of bad mortgage bonds as long as they made a healthy profit while doing it.
Mr. Grantham argues for more regulation to rein back some of Wall Street's practices. A pity we didn't get that in the recent "financial reform" legislation passed by Congress.
Saturday, July 17, 2010
The New Global Consumers
It is the basic nature of things. Nothing or no one stays on top forever.
Look at the mighty US consumer - long the dominant force in world trade. But no longer...we've crossed an important threshold.
The US consumer has been surpassed by consumers in the emerging world. Emerging market economies now represent about 33 percent of consumer spending worldwide. US consumer spending now accounts for only 27 percent of total global consumer spending.
One example of this trend is the automobile market. China's vehicle market grew by 45 percent last year to become the biggest in the world. GM, for the first time ever, now sells more cars in China than in the United States.
The Economist Magazine said that multinational companies expect about 70 percent of the world's economic growth over the next few years to come from emerging markets. And 40 percent of the world's growth will come from just two countries - China and India.
But these two countries are not alone. Many countries' economies are growing at a torrid pace. Singapore, for instance, grew at a rate of 18 percent in the first half of 2010.
It's a great time to be an investor as we witness the history-making shift in global markets. Especially for investors who look for opportunities outside slow-growing economies like the United States.
At the least, investors should look at multinational companies such as Coca Cola. Coke now gets about 75 percent of its sales from overseas. In the first quarter of 2010, Coke reported a 20 percent increase in profits despite the fact that US sales declined. Sales in emerging markets, such as India (up 29%)and Turkey (up 18%) made it possible.
And many large emerging consumer markets remain nearly untapped. Indonesia, for instance. It has the world's fourth largest population - behind China, India and the United States - with 240 million people.
Ford just opened its first dealership there. And Heinz reports that Indonesia is a big part of why its Asian sales rose 41 percent last year.
Yet, despite all these exciting changes in the global economy, most US investors continue to snooze. They continue to have nearly all of their portfolio concentrated on the nearly-moribund US economy.
There are simple, easy ways to invest overseas through the use of exchange traded funds (ETFs). Please feel free to send an email and I will be glad to help you find some ETFs.
Look at the mighty US consumer - long the dominant force in world trade. But no longer...we've crossed an important threshold.
The US consumer has been surpassed by consumers in the emerging world. Emerging market economies now represent about 33 percent of consumer spending worldwide. US consumer spending now accounts for only 27 percent of total global consumer spending.
One example of this trend is the automobile market. China's vehicle market grew by 45 percent last year to become the biggest in the world. GM, for the first time ever, now sells more cars in China than in the United States.
The Economist Magazine said that multinational companies expect about 70 percent of the world's economic growth over the next few years to come from emerging markets. And 40 percent of the world's growth will come from just two countries - China and India.
But these two countries are not alone. Many countries' economies are growing at a torrid pace. Singapore, for instance, grew at a rate of 18 percent in the first half of 2010.
It's a great time to be an investor as we witness the history-making shift in global markets. Especially for investors who look for opportunities outside slow-growing economies like the United States.
At the least, investors should look at multinational companies such as Coca Cola. Coke now gets about 75 percent of its sales from overseas. In the first quarter of 2010, Coke reported a 20 percent increase in profits despite the fact that US sales declined. Sales in emerging markets, such as India (up 29%)and Turkey (up 18%) made it possible.
And many large emerging consumer markets remain nearly untapped. Indonesia, for instance. It has the world's fourth largest population - behind China, India and the United States - with 240 million people.
Ford just opened its first dealership there. And Heinz reports that Indonesia is a big part of why its Asian sales rose 41 percent last year.
Yet, despite all these exciting changes in the global economy, most US investors continue to snooze. They continue to have nearly all of their portfolio concentrated on the nearly-moribund US economy.
There are simple, easy ways to invest overseas through the use of exchange traded funds (ETFs). Please feel free to send an email and I will be glad to help you find some ETFs.
Subscribe to:
Posts (Atom)
Posts
