Why the Obamaconomy doesn’t bother rich people: we’ve disinvested in the U.S.
To one of the 20+ million unemployed, underemployed, or “discouraged” Americans, the U.S. economic situation of 2009-2011 (let’s call it “the Obamaconomy” for shorthand, having been preceded by the “Bush Bubble” and the “Clinton Boom”) remains painful. Yet folks with jobs and the kind of rich people who have political influence (e.g., the folks who attended a $30,800/person fundraising dinner that resulted in the shutdown of one quarter of Manhattan on Tuesday night) don’t seem overly concerned about unemployment, government debt, or any of the other problems facing the U.S. going forward. The newspapers are filled with stories about our new Libyan war rather than what is happening to families of the chronically unemployed.
As part of my efforts to complete 2010 taxes, I took a look at my investment portfolio, which is probably pretty typical for an American (sadly it is not sized like a Wall Streeter’s or plastic surgeon’s, but the allocations are likely similar). It turns out that I have unintentionally disinvested in the U.S. About ten years ago I invested in a mixture of mutual funds. The U.S. large capitalization stocks (S&P 500) have stagnated. They’re worth about the same in nominal dollars, but the dollar has been debased relative to Euros, gold, oil, or almost any other yardstick. So the U.S. stocks are worth about 30 percent less. The foreign stocks have held up reasonably well, especially the emerging markets. Meanwhile the S&P 500 companies have experienced so much more growth in foreign countries, that a healthy fraction of an investment in the S&P 500 is now foreign economy exposure.
If my foreign market exposure was about 30 percent ten years ago, it is now closer to 60 percent, despite the fact that I haven’t made any trades. Simply as a consequence of the poor performance of U.S. equities and the U.S. dollar, only those folks who’ve been conscientious about portfolio rebalancing are still primarily investors in the U.S. economy. So it would be nice if the U.S. economy grew fast enough to create some jobs for the unemployed, but really the typical investor’s main financial interest is in the growth of other economies.
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