In Thomas Friedman’s influential book “The World is Flat”, he argued that because of breakthroughs in technology and communications, distinctions between countries are becoming less important.
On the contrary, I believe that the world is round, and that America is still at the top. And if we take vigorous action on radically reforming our government, economy, and educational system, our country’s best days may be ahead of it.
America is not just any country. Looking at the big picture of history, economics, politics, independent judiciary, education and health opportunities, free press, openness, freedom, sense of obligation and community – America is exceptional. No disrespect intended, but America is first among equals.
As head of an investment research advisory in Cabot Explorer, I closely follow the progress that many emerging market countries have made and applaud that a billion people have been pulled from poverty over the last 20 years.
The challenge from a rising China is real and should not be underestimated.
But the media is overstating America’s weaknesses and missing America’s great competitive advantages. In an increasingly competitive global marketplace and in the diplomatic corridors of power, American is a leader and can still lead.
Our future is in our hands.
[text_ad]
What’s Next for America – and the World?
But history shows that great countries and civilizations fail due to one or more of three shortcomings: a lack of fiscal discipline; a culture that does not promote openness, scientific innovation or the common good; and a foreign policy not grounded in the national interest and executed at the extremes of isolationism or foreign interventionism.
America has been blessed by geography, ample natural resources, and a free form of government that allows it to be strong, secure and independent even as it participates fully in the global marketplace.
But America needs a spurt of creativity and growth that resembles the period in the early 20th century when it first became a dominant player on the global economic stage.
Here is how Charles Morris describes this era in the opening of his book “The Tycoons”:
“America was not only the most populous of industrial countries but the richest by any standard – per capita income, natural resource endowment, industrial production, the value of its farms and factories. It dominated world markets – not just in steel and oil but in wheat and cotton. It ran huge trade surpluses in goods and was gaining preeminence in financial services. Its people were the most mobile, the most productive, the most inventive, and, on average, the best educated. …..
“Attentive European elites were shocked as they came to understand the scale and speed of America’s ascendancy.”
Of course. the American economy is now at a different stage of development. Some of the above quote immediately brings China to mind, but some of the above passage still applies to the America of today.
America is still one of the fastest growing of the large, industrialized economies. Most of the Fortune Global 500 are American firms, though we are again closely followed by China.
The vitality of the American economy is also highlighted by the fact that only 20 of the current Fortune 100 companies were even around in 1980. We still have the deepest and most liquid capital markets in the world, although our competitors are gaining ground.
My view is that while the world is clearly filling in and emerging competitors are catching up with us quickly due to rapid advancements in technology and communications, the American economy is more than holding its own.
And I believe that the overall performance of the U.S. stock market, and in particular certain sectors such as financials, technology and healthcare, may very well continue to outpace global markets.
And the strength of the U.S. dollar has dumbfounded pessimistic pundits.
An All-In-One Investment in Global Growth
One of my favorite exchange-traded funds, the iShares S&P Global 100 (IOO), reflects this balance while providing investors with exposure to the 100 largest companies in the world – of which 50% are American and 50% international.
It has a 45% weighting to technology and of its top 10 holdings, only one is not an American company. I highly recommend this ETF as a core holding as it has outperformed its benchmark this year as well as during the last year, three years, five years, and 10 years.
At the core of the Cabot Explorer’s strategy is to put America at the center but also pay close attention to international stocks trading on U.S. markets. This leads to higher returns and lower risk and volatility. To learn what global stocks I’m currently recommending, take out a subscription today.
[author_ad]
