Wake Up… and Reap the Immediate Financial Rewards

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In my last column, I noted that the data plainly show we are in what will soon be the longest economic expansion in U.S. history.

The economy is adding more than 300,000 net new jobs a month. Unemployment is near an all-time low.

Median household income is at a record-high, inflation-adjusted $61,372. Americans are working shorter hours. And our money goes further than ever.

Inflation is below 2%. And, according to the U.S. Bureau of Labor Statistics, Americans today spend a much smaller percentage of their incomes on necessities like food, clothing and housing than they have in the past.

Some people grouse about the vanishing middle class. Apparently, they don’t realize that these folks are moving up… not down.

More people than ever live in households pulling down $100,000 a year. Fewer households earn less than $35,000.

The Federal Reserve reports that U.S. household net worth – assets minus liabilities – is at record levels too. It rose by $2.07 trillion in the third quarter to hit $109 trillion.

Spectrum Group reports that there are more millionaires in the U.S. than ever. At the end of 2017, there were 11 million households with a seven-figure net worth.

(And, thanks to surging stock prices and housing values, the 2018 number – out soon – will be larger still.)

The economy is strong. Interest rates – despite nine hikes by the central bank – are still near historic lows. The stock market is in an uptrend, as it has been for nearly 10 years.

The bond market – for its part – has been in one massive bull market since Treasury yields peaked at 14% in the spring of 1984.

Educational attainment has never been greater. Violent crime is in a long-term cycle of decline. Abortion rates just hit a record low. All forms of pollution – with the exception of greenhouse gases – are in decline.

Information and communication – and much entertainment – are now virtually free. (There are no user fees for Google, Facebook, Twitter, YouTube, Snapchat, Instagram and many other technological innovations.)

We are more socially tolerant than ever before. Huge majorities, for example, view same-sex or interracial marriage favorably.

In short, Americans are living longer, safer, richer, freer lives than ever before.

Yet – as I also pointed out in my last column – a new NBC News/Wall Street Journal poll shows that 7 out of 10 Americans believe the country is on the wrong track.

This is nothing new, incidentally. Americans have told pollsters this for years now.

Why the disconnect?

As I see it, there are seven major reasons. (I’ll discuss the last one in my next column.)

  1. Ignorance of the Facts. Most of us simply aren’t aware of the true state of the world. In his excellent new book, Factfulness: Ten Reasons We’re Wrong About the World – and Why Things Are Better Than You Think, renowned public educator Hans Rosling explains how he posed hundreds of questions to thousands of people in dozens of countries.He concludes that “Everyone seems to get the world devastatingly wrong. Not only devastatingly wrong, but systematically wrong… worse than the results I would get if the people answering my questions had no knowledge at all.”
  2. Lack of Perspective. Few truly appreciate just how tough life was for our ancestors. Most men and women worked long hours doing hard physical labor. (That includes homemakers.) Your great-grandparents would view your life today – with all its modern conveniences (microwaves, dishwashers, coffee makers, lounge chairs that give massages) – as the realization of some utopia.
  3. Habituation. Whenever new products or developments appear, we rapidly adopt them and just as quickly take them for granted. Heart transplants, space probes, high-speed internet connections, smartphones, 70-inch Ultra HDTVs, immunotherapies, a new cure for hepatitis. Ho-hum. What else is new?
  4. The Hedonic Treadmill. In some ways, human beings are hardwired to feel dissatisfaction. We strive to achieve what we desire. Those things satisfy us for a while. But nothing ever quite does it. And so we yearn for something more: a better-paying job, a new car, a bigger house, a firmer abdomen, a sexier spouse. It’s a recipe for unhappiness.
  5. Status Anxiety. Researchers have discovered that, to an astonishing degree, our life satisfaction is tied to how we evaluate our position in society relative to others. Honoré de Balzac called envy “the most stupid of vices for there is no single advantage to be gained from it.” (Unless, of course, you’re a politician running for office.) If you insist on doing this, at least do it right. According to the Credit Suisse Global Wealth Report 2018, an income of $32,400 puts you in the top 1% globally. (Congratulations! You’re a one-percenter.)
  6. Apprehension About the Future. Despite peace and widespread prosperity, many cannot enjoy it thanks to the coming (take your pick) economic meltdown, currency collapse, political crisis, terrorist attack, population explosion, bird flu epidemic, mineral shortage, war in the Middle East, debt default, government shutdown, North Korean nuclear attack or environmental catastrophe.

I’ll be the first to concede that future peace and prosperity are not guaranteed.

But let’s keep two things in mind. The first is that alarmists of all stripes have been telling us to cup our groins and crawl into the fetal position for decades now, and things really haven’t gone their way.

The second is that today human beings, technology and capital markets operate as a comprehensive problem-solving machine, improving our lives in almost every way imaginable: faster communications, more powerful computers, safer transportation, and lifesaving drugs and medical devices, to name just a few.

The world’s great investors – Warren Buffett, Peter Lynch, John Templeton – always recognized this, and reaped the rewards for themselves and their shareholders.

In my next column, we’ll discuss how you can join them. And here’s the best part: You don’t have to do anything.

You only have to stop doing something.

In the process, you’ll save yourself hours of wasted time… and make yourself many thousands of dollars.

Stay tuned…

Good investing,

Alex

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