15/10: Rebuilding Our Wealth
Over the past 20-30 years or longer we have been spending more than we make as a nation. Much of this spending has found its way into other assets, thereby representing investment (building asset values rather than outright consumption). In recent years the pace of this overspend has accelerated and the end use more often was for consumer goods and services that do not build wealth but rather diminish it.
The stock market boom of the nineties and the follow-on housing bubble has masked this trend by an increase in asset values. Meanwhile productive capacity and infrastructure has not kept pace. Incomes also have stagnated for most families in the US.
We will change our behavior. We must.
The long-term investment implications are profound. In short our annual spend rate of $1.06 (as reflected by our balance of payments) must decline to $0.94 if we our to fund our future growth and prosperity. The transition will be painful while the outcome should be renewed prosperity and perhaps more social equity.
One dimension of this change will be the adoption of “green” as a normal way of life. Choose any resource that we use everyday and ponder our wastefulness. Gasoline and water are the most obvious items that can be (and will be) conserved easily. Why do we not require that automobiles get at least 40 miles per gallon? The technology is in place, we need only use it. So too our use of water is wasteful. One need not think hard to get started on a solution. The greening of America is (and will continue) opening many new investment opportunities while penalizing those who ignore these imperatives.
Not only will we save more income, we will develop new ways to conserve resources.
OSF
October 15 2007
The stock market boom of the nineties and the follow-on housing bubble has masked this trend by an increase in asset values. Meanwhile productive capacity and infrastructure has not kept pace. Incomes also have stagnated for most families in the US.
We will change our behavior. We must.
The long-term investment implications are profound. In short our annual spend rate of $1.06 (as reflected by our balance of payments) must decline to $0.94 if we our to fund our future growth and prosperity. The transition will be painful while the outcome should be renewed prosperity and perhaps more social equity.
One dimension of this change will be the adoption of “green” as a normal way of life. Choose any resource that we use everyday and ponder our wastefulness. Gasoline and water are the most obvious items that can be (and will be) conserved easily. Why do we not require that automobiles get at least 40 miles per gallon? The technology is in place, we need only use it. So too our use of water is wasteful. One need not think hard to get started on a solution. The greening of America is (and will continue) opening many new investment opportunities while penalizing those who ignore these imperatives.
Not only will we save more income, we will develop new ways to conserve resources.
OSF
October 15 2007
10/10: What Next?
The Benchmark investment posture, slow and steady, served clients well in the third quarter of 2007. The wild ride and strong headline performance of the large cap indices masked the damage done to small caps and speculative investments.
We continue to be wary of the risks seen and unseen in the US and Global economy as well in the financial markets world-wide. More liquidity provided by central bankers does not cure insolvency, rather it allows many to overlook
the underlying fundamentals.
Consumer spending is weak again in September after good numbers in July and August. We believe a weak fourth quarter is a strong possibility. We also think that a recession may have begun in August/September or at least a period
of no-growth. We retain our cautious investment stance. Broadly diversified portfolios did relatively better than stock-heavy portfolios in the period, and we continue to think that will be true off and on until fundamentals improve.
OSF
October 10, 2007
We continue to be wary of the risks seen and unseen in the US and Global economy as well in the financial markets world-wide. More liquidity provided by central bankers does not cure insolvency, rather it allows many to overlook
the underlying fundamentals.
Consumer spending is weak again in September after good numbers in July and August. We believe a weak fourth quarter is a strong possibility. We also think that a recession may have begun in August/September or at least a period
of no-growth. We retain our cautious investment stance. Broadly diversified portfolios did relatively better than stock-heavy portfolios in the period, and we continue to think that will be true off and on until fundamentals improve.
OSF
October 10, 2007
