newsletter
Optimistic Long-Term Outlook amidst Volatility
May 2008
With the
recent stock market volatility, we thought the American Funds brochure Riding
Out the Bumps might be timely. We especially like the charts under
‘What’s your outlook?’ One chart shows the short-term bumps and
the other shows long-term growth.
Before you read any further, go to those two charts and ask yourself, “Which one makes me more nervous”? Then read the paragraph between the two
charts, we think you’ll be surprised. Now you know why we like this particular
brochure!
We expect
volatility to stay with us pretty much through the rest of this year (at least
through the elections). We are
seeing signs that we may have hit the bottom or may be very close to the bottom
and the worst of this correction may be pretty much over, however, we probably
won’t know for several months.
To further
boost our optimistic long-term outlook, we recently attended a meeting where
the speaker was Economist and Author of ECONAMERICA, Jeff Thredgold. Following
are some of his comments:
‘Education will be of extreme
importance in the future. If your
children or grandchildren need motivation to go to college, just tell them that
in 1980 college graduates earned 25% more than high school graduates. Today college graduates earn 90% more
than high school graduates.’
‘Four percent of our economy
is housing which is undergoing a down turn. Eleven percent of our economy is exports
which are growing at a rate of about 16% per year.’
‘Current
Mr. Thredgold pointed to four main factors that he believes
will keep inflation under control:
1 –
Competition. There is a one-third
excess in the world’s production capacity.
2 –
Consumers are smarter, bolder and more willing to negotiate the price of goods
and services.
3 –
Technological advances will continue to increase productivity.
4 –
The internet is projected to save businesses globally $1.25 trillion over the
next several years.
Regarding the
internet he says that ‘only 10% of
the internet’s potential is currently being realized. There are 65,000 new websites created
every three minutes, so the internet will play a big part in our economic
growth.’
As for the
world population, he commented that ‘50%
have never made a phone call and only 2% are college
grads. Our garbage disposals are
fed better than two-thirds of the world population. Also, two-thirds of the world population
is under age 50 and a baby girl being born in the
According
to Mr. Thredgold, the reason capitalism will continue
to expand while socialism and communism will continue to diminish is because of
what he termed “PRTI – People
Respond To Incentives”.
He predicts
the problems with social security and the national debt will eventually be
handled. ‘Social security will be tweaked until benefits are reduced,
leveled out or delayed and taxes will be increased. Overall taxes probably will not increase
that much because even Congress will realize that lower taxes generate higher
revenues and even a democratic congress will eventually understand that.’
All in all
it was a pretty upbeat presentation compared to all the negative news that we
hear and read everyday. We have a
copy of his book available in our library if you would like to borrow it.
Securities
through KMS Financial Services Inc.
520.884.7550
jpw@financial-architects.com brienne@financial-architects.com
3971 E. Paradise Falls,