FRANK HOLMES: There’s No Place Like America

A conference with CEOs from around the globe recently brought me to Europe—the centre of Western civilisation, the cradle of democracy, innovation and creativity, and the crux of today’s debt crisis. In Siena, I came across a medieval reminder of the effects of good and bad government inside the Palazzo Pubblico among the beautifully painted frescoes.

One mural, “The Allegory of Good Government,” personifies the virtues of justice, peace, virtue and wisdom, emphasising the importance of a stable government. Two more frescos flank this painting, one depicting the effects of good government and another showing the effects of bad government.

Ambriogio Lorenzetti's fresco, 'The Allegory of Good Government'

Surrounded by historic beauty, it’s sad to see the disillusioned faces on the streets of Europe. If a picture is worth a thousand words, the one below might be more monumental than that. Business Insider featured this chart showing the rising unemployment rate among the youth throughout Europe. Since the 2009 global crisis through April 2012, youth unemployment has skyrocketed in Spain, Greece, Portugal, Italy and Ireland.

European Youth Unemployment Skyrockets

Ian McAvity recently shared some words of wisdom related to Europe’s colossal challenges: “When times get tough, economic nationalism and protectionism tends to rise because it is always easier to blame someone else for self-inflicted problems.”

The contrast of historic beauty against tragedy is one for Shakespeare. Back in the U.S., I am thankful for the entrepreneurial heart that beats throughout America. As the election grows closer, I’m confident it’ll beat louder to persuade the U.S. government to pursue thoughtful policies that embody essential American principles.

One should not underestimate what it means to be American; you don’t find a feeling quite like it outside the nation. In fact, emerging countries such as Singapore and China are now striving to replicate what my friend Alexander Green calls “American exceptionalism.”

He says the U.S. is the world’s economic superpower today not only because of geography, but, more importantly, the fact that entrepreneurs were free to innovate and create. Alex writes, “America cultivates, celebrates and rewards the habits that make men and women successful. It promises that anyone with ambition and grit can move up the economic ladder, that everyone has a chance to better his or her lot, regardless of circumstances.”

This feeling of empowerment has created a national group of well-informed and very engaged individuals. On the Organisation for Economic Cooperation and Development (OECD) “Your Better Life Index” based on 11 diverse measures of well-being, the U.S. is highly ranked. Each element measures a feeling of satisfaction with life, including health, education, environment, personal security, life satisfaction, and work-life balance. Here are a few of the highlights from OECD’s summary of the U.S.:

  • The average income in the U.S. is nearly $38,000 a year, considerably more than the OECD average income of about $22,000.
  • Almost 90 per cent of adults in the U.S. have a high-school degree (or equivalent); the OECD average is 74 per cent.
  • Americans have a strong sense of community, as 92 per cent know someone they could rely on in a time of need. The OECD average is 91 per cent.
  • Voter turnout was significantly higher than the world average: 90 per cent of those registered participate in the U.S. political process, compared to 73 per cent for the rest of the world.
  • American households spend an average of only 20 per cent of net disposable income on rent/home loans, gas, electricity, water, furnishings or repairs. The OECD average is 22 per cent.
How Much Goods Cost Around the World

While a 2 per cent difference in household spending isn’t striking, pennies add up. In a Deutsche Bank survey of how much a variety of goods cost around the world, the research firm found that New York “was found to be significantly cheaper than other major financial hubs even after accounting for taxes and other additional charges.”

According to its study, if I wanted to buy Apple’s iPhone in Europe, it would’ve cost me $845; filling a car with a liter of petrol would cost over $1 more than it does in the U.S. A pair of Levis is nearly double the price than the same pair in New York City. On multiple measures, New York City offers more for your money compared to Paris, Sao Paolo or Tokyo.

See “How Far Will Your Money Go” Infographic Now.

Nonetheless, consumers on the other side of the world willingly line up to purchase American-made goods, even at a premium price.

Affordability is partially why 60 million international tourists choose to immerse themselves in American culture each year. While Canada and Mexico make up the majority of these visitors, tourists from Brazil and China have been visiting in record numbers, according to data from the U.S. International Trade Administration. In 2011, visitors from Brazil increased 26 per cent to 1.5 million people. About 1 million Chinese visited the U.S. in 2011, which was an increase of 36 per cent over the previous year.

As the rising middle class in emerging markets gain more disposable income, they desire the same financial and social mobility that Americans take for granted. For that mobility, each visitor spends about $4,000 on travel, clothes, food and attractions.

Invest in America
In his article, Alex Green describes the traits that a typical American embodies: “an optimistic attitude, a can-do spirit, and an enthusiastic endorsement of the pursuit of happiness through individual initiative and self-reliance.”

Investors aren’t endorsing U.S. equities these days. With all the positive aspects mentioned above, today’s low participation in the U.S. stock market is perplexing. Here are two more reasons to invest today: 1) About 620 companies in the S&P 1500 Index are growing their revenues at more than 10 per cent; and 2) 428 stocks in the index have an annualized dividend yield higher than the 10-year Treasury.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The S&P 1500 Composite is a broad-based capitalisation-weighted index of 1500 U.S. companies and is comprised of the S&P 400, S&P 500, and the S&P 600. None of U.S. Global Investors Funds held any of the securities mentioned as of 3/31/12.

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