Is it Real, or Just Politics?

Part of the unending political cycle is the parade of wannabe elected officials touting their version of “Doom and Gloom” as a reason to kick out the current crew and elect fresh new faces.

The reality is, at least to multiple publications, the world is the best it’s ever been. (https://www.nytimes.com/2019/01/05/opinion/sunday/2018-progress-poverty-health.html, https://www.quora.com/Is-the-world-a-better-place-today-than-it-was-25-years-ago-and-is-it-a-better-place-than-it-will-be-25-years-from-now, https://www.forbes.com/sites/stevedenning/2017/11/30/why-the-world-is-getting-better-why-hardly-anyone-knows-it/#36fd10ad7826, etc.)

And yet when polled in 2017, only 6% of Americans thought the world is getting better. The percentage of people living in extreme poverty has never been lower, Literacy is way up, health is much improved as diseases are eradicated, nutrition has improved and life expectancies are rising?

Why don’t we know the world is getting better? Forbes’ conclusion:

Our World In Data suggests that the media are partly to blame. The media does not tell us how the world is changing, it tells us where the world is going wrong. It tends to focus on single events particularly single events that have gone bad. By contrast, positive developments happen slowly with no particular event to promote in a headline. “More people are healthy today than yesterday,” just doesn’t cut it.

The result is that most people are ignorant about how the state of the world has changed. In both the U.K. and the U.S. most people think that “the share of people living in extreme poverty has increased! Two thirds in the US even think the share in extreme poverty has ‘almost doubled’.”

Apparently, ignorance is not bliss. The United States ranks as only the 18th happiest country in the world (https://en.wikipedia.org/wiki/World_Happiness_Report). Too many Americans like to claim they are miserable or feel they are fine, but everyone else should be miserable! Try living in South Sudan, the lowest ranked country on the list, if you want to know what miserable is. And, yes I’ve been there, and it is miserable.

So for the next few blog posts at www.deshurkoblog.com, I will spend some time looking at real data and try and debunk some of the doom and gloom statistics that are so prevalent in the news. This is not meant to be market-oriented. But you can’t be objective about the market, or anything else if you start off with an erroneous bias.

I will start today with a piece of news that has been hitting the media. “Our economic expansion is over because consumers have historic levels of debt.” A graph like this is usually included:

Looks pretty brutal. Debt is skyrocketing. But is that what matters? Debt is a function of the ability to pay. $100,000 of debt may be crushing to someone making $50,000 a year, but a minor annoyance to someone making $300,000 a year. So the proper metric is the ability to service that debt. Below is a graph showing all consumer debt payments divided by personal income.

Sure, there are people overburdened with debt. They screwed up. People always do. Many times for what seemed to be good reasons (student loans), but overall, as a country, as an economy, personal debt is just not an issue.

Another way to look at it is by looking at net worth, what we own divided by what we owe.

That downturn at the end is the fourth quarter of 2018…brutal. But overall a pretty solid and consistent rise in net worth. As a nation, as an economy, our financial well-being has never been better.

While income and net worth disparity is an issue, in my opinion, no one is going to close the gap by collecting unemployment and welfare checks. Below is a graph of working age Americans that are unemployed. We are at historically low levels.

And finally, not only are more Americans working, but wages are once again growing at a fairly steady rate (+4%) since a sharp decline in 2015 to early 2016.

Summary

Sometimes it’s best to be careful what you wish for. Sure every level of life can always stand improvement, but to base one’s life and on a larger scale, how we run our country on perceived weaknesses that just don’t exist is not a solution. There are real issues, but addressing those means separating the real from the feigned. Decisions need to be based on facts that really matter.

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bill@401advisor.com • 937.434.1790

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Charles H. Dow Award Winner 2008. The papers honored with this award have represented the richness and depth of technical analysis.

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