Don't Count Out America

One of my favorite financial commentators is Jim O'Neill, who heads up the asset management division of Goldman Sachs. He's the guy who famously coined the acronym BRIC to refer to Brazil, Russia, India, and China, and he's just written a new book titled The Growth Map, which explores economic opportunity around the globe.

In addition to his enthusiasm for booming economies like the BRICs and emerging economic powerhouses like South Korea and Mexico, O'Neill is surprisingly bullish on the United States. Just recently, he told Charlie Rose that the world shouldn't count America out.

O'Neill feels that real progress is being made in the housing and energy sectors of the American economy, which will help lead the recovery. And he even believes unemployment will drop more than many of his fellow pundits are forecasting. A look at some recent studies seems to support O'Neill's overall outlook.

Energizing America
Last week we heard some very encouraging news on the energy front. A Bloomberg report noted that America's domestic oil output is the highest in eight years, and projected that the United States could become the world's top energy producer by 2020. This is great news, which could result in higher incomes, employment, and government revenue in the near future.

This is potentially great news for investors in particular. My colleague Dave Meier feels Denbury Resources (NYSE: DNR  ) is an excellent way to play this growth in America's energy output. The company uses CO2 to extract leftover oil from older wells, and is likely to be a growing domestic player over the next 20 years. I also believe that ExxonMobil (NYSE: XOM  ) is well positioned to benefit from current energy trends, as it has the size and breadth to continue investing in key areas like natural gas for future growth opportunities.

Is the housing bottom finally here?
There's also evidence that the housing market is improving. The well-respected blog Calculated Risk argues that we may have finally reached a bottom in housing prices. The blog feels that we've already seen the bottom for housing starts and new home sales, and that the bottom for housing prices should be reached around March 2012.

This news also bodes well for investors. As the housing market picks up, that should considerably improve the prospects for both Lowe's (NYSE: LOW  ) and Home Depot (NYSE: HD  ) , as consumers spend more on new and existing homes. Home Depot's stock price has been the stronger performer of the two over the past year, but I suspect both companies will do well in the near future. An improving housing market should also steady our big banks. I think Wells Fargo (NYSE: WFC  ) , for example, is a solid, well-managed bank that might do very well in a recovery.

Hear our engines roar
Clint Eastwood declared in the now notorious Super Bowl ad that "the world's gonna hear the roar of our engines." Actually, there seems to be a lot of evidence that it already is hearing that roar. We're obviously not out of the woods yet by any means. The one big thing that worries O'Neill about the United States is our completely dysfunctional political system, which seems more than capable of snatching defeat from the jaws of victory.

I strongly feel that energy will be one of the big drivers of growth for America in the coming years, and I think ExxonMobil might be a solid way to play that trend. Our top analysts here at The Motley Fool, however, really like another well-run energy company that they believe is "one of the best operators" in the industry.

To learn more about this compelling pick, have a look at our free report, "The Only Energy Stock You'll Ever Need." You can get it by clicking here.

John Reeves does not own shares in any of the companies mentioned in this article. You can follow him on Twitter, where he goes by @TMFBane.

The Motley Fool owns shares of Wells Fargo and Denbury Resources. The Fool owns shares of and has created a covered strangle position on Wells Fargo. Motley Fool newsletter services have recommended buying shares of The Home Depot and Lowe's. Motley Fool newsletter services have recommended writing covered calls in Lowe's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (16) | Recommend This Article (32)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 17, 2012, at 10:48 AM, DJDynamicNC wrote:

    I never bet against America.

    Good article!

  • Report this Comment On February 17, 2012, at 2:59 PM, TMFBane wrote:

    Thanks, DJDynamicNC. I never bet against America either!

  • Report this Comment On February 17, 2012, at 5:51 PM, pedorrero wrote:

    Goldman Sachs? A bunch of thieves. Looting the Treasury with the assistance of their well-bought legislators. This is exactly what has gone wrong with the USA (not that Goldman is the only one, just one of the most blatant of the past few years.) America is circling the drain.

  • Report this Comment On February 18, 2012, at 12:47 PM, steltek wrote:

    As an investor, I wouldn't bet on an "America" ETF, for instance. There are some serious growth stories in America, maybe even some of the best in the world. But as a nationwide, aggregate bet? I would put a bear spread on America. It's moving slowly down, but I don't expect it to tank.

    If we're really truly honest with ourselves, if we peel back the onion, we know America's output has contracted for most of the last 15 years. Inflation has outpaced GDP growth, especially if you remove the growth of government spending. Increased deficit spending is not growth!

    A better figure for growth measurement would be "net" domestic product, where enterprise product - government spending = net domestic product. Government is a cost to society. The more resources we put toward governing, the less efficient and the less productive we are delivering the goods and services that make life sustainable or happy. At 46.6% of GDP, govt spending is threatening to eclipse private spending in the next decade. Once it crosses the 50% threshold, it will be an all but insurmountable hurdle to growth.

    As a citizen of the U.S., however, I am moderately bullish. I don't believe in our system, government, or institutions. I believe in the spirit of our people, and I believe it will reach a point of indignation so great, the insiders who benefit from the current system will be sent running for the hills. I believe in the spirit of rebirth. I just hope it doesn't take 20 years to get there.

  • Report this Comment On February 18, 2012, at 1:37 PM, ST6yaniac wrote:

    America is in deep trouble completely at the hands of greedy politicians. As a citizen and investor i try very hard to make the right choices. Its gets harder with every passing election.

  • Report this Comment On February 18, 2012, at 1:44 PM, steltek wrote:

    As an investor, I wouldn't bet on an "America" ETF, for instance. There are some serious growth stories in America, maybe even some of the best in the world. But as a nationwide, aggregate bet? I would put a bear spread on America. It's moving slowly down, but I don't expect it to tank.

    If we're really truly honest with ourselves, if we peel back the onion, we know America's output has contracted for most of the last 15 years. Inflation has outpaced GDP growth, especially if you remove the growth of government spending. Increased deficit spending is not growth!

    A better figure for growth measurement would be "net" domestic product, where enterprise product - government spending = net domestic product. Government is a cost to society. The more resources we put toward governing, the less efficient and the less productive we are delivering the goods and services that make life sustainable or happy. At 46.6% of GDP, govt spending is threatening to eclipse private spending in the next decade. Once it crosses the 50% threshold, it will be an all but insurmountable hurdle to growth.

    As a citizen of the U.S., however, I am moderately bullish. I don't believe in our system, government, or institutions. I believe in the spirit of our people, and I believe it will reach a point of indignation so great, the insiders who benefit from the current system will be sent running for the hills. I believe in the spirit of rebirth. I just hope it doesn't take 20 years to get there.

  • Report this Comment On February 18, 2012, at 1:45 PM, steltek wrote:

    Gah, this posting system is so messed up. I don't know why it double posts me all the time. I waited more than 15 minutes and refreshed just to be sure and my post was still missing. Apologies.

  • Report this Comment On February 18, 2012, at 2:45 PM, Gorm wrote:

    A lot of happy talk!! Unbelievable happy talk on the US!!

    Demographics are working against us! America is aging, meaning it spends less, saves more, and will increasingly become a public expense.

    Consumers are mired in debt. Total consumer debt more than doubled from 2000 to 2008. Like a hangover, it will take time to deleverage.

    Greece is going to default and that will have ramifications and if nothing else, PROVE there are consequences to UNMANAGED DEBT.

    Housing valuations are STILL sliding in many markets. Housing is one of the greatest reflectors of personal wealth and well being. Don't discount it.

    I am STILL awaiting an explanation from BLS on how we lost 1.2M workers and job force participation rate fell to a record LOW of 63.7% but unemployment drops 4 points???

    And worse of all, US Leadership is a JOKE. We are plagued by huge deficits, a stifling national debt, unaffordable entitlements, surging health care, falling educational performance and these buffoons are in a lifeless trance sucking up to their special interests and SCREWING the majority of Americans.

    Sorry, but my version is more realistic.

    Gorm

  • Report this Comment On February 18, 2012, at 4:18 PM, terryongarland wrote:

    Agree with the previous post. Last night watching ABC News and Diane Sawyer, gushing about the economy I was struck by how much hype is being distributed.Obama taking a "victory lap" at Boeing of all places. Gotta laugh at that.

    It has been said that both political parties believe that the American people are "stupid , gullible, and easily manipulated " Sadly true I fear.

  • Report this Comment On February 18, 2012, at 6:32 PM, rgperrin wrote:

    You are whistling past the grave yard. The United States is in precipitous and all-but-irreversible social and cultural decline. This precedes economic decline, which, in turn, hastens social and cultural decline. In many ways, we are now experiencing the reverse of what went into the making of the once successful American experiment. Read Tocqueville's Democracy in America (1835-1840) and Max Weber's The Protestant Ethic and the Spirit of Capitalism (1904-1905), and compare what is there written to the evidence of your eyes in today's America.

  • Report this Comment On February 18, 2012, at 7:46 PM, TMFBane wrote:

    Thanks for all of your comments, everyone! I think there are two ways of thinking about America’s prospects. The first way is more near term. Is America’s economy coming back after the Great Recession? I think there are encouraging signs of a recovery, and that’s what this article is about.

    The second way of thinking about our future is longer term. Does American “exceptionalism” mean that we will continue to be the world’s premier power over the next century? Or are we in the early stages of decline?

    The case for the latter is pretty compelling, as many of you have pointed out. Our educational system is poor. And our political discourse is a joke -- some of our debates just seem so silly and unnecessary to me.

    Despite all that, I’m incredibly optimistic about the future of America. I think San Francisco – one of my favorite cities – really illustrates a lot of our strengths.

    Every time I visit I’m struck by the diversity and energy of the place. It’s a city of Asian-Americans, Latinos, African-Americans, Gays, Lesbians, and countless others all working together in an incredibly beautiful and prosperous city. Is it really a coincidence that Apple – arguably the greatest company in the world – emerged nearby such a melting pot?

    I still believe America is a land of opportunity, and that’s why people sacrifice everything to come here. So, I bet we’ll succeed despite all of the bickering!

  • Report this Comment On February 18, 2012, at 9:51 PM, deborahyetts wrote:

    it really is funny that anyone that still believes that capitalism is the road to prosperity,after the last 20 years , thats like saying the devil is honest, honesty and fairness is the base for capitalism to work from, and what party,bank,business,person-etc.-etc.-on and on would that be, deregulation in every industry etc-da-da is a big part in the downward spiral of honest income made and worked for,but you can buy that you cannot buy a future you still have to make it

  • Report this Comment On February 19, 2012, at 1:57 AM, WiseWillyAgain wrote:

    tmfbane: well said and agreed that people are still coming to America for opportunity. However, they are also pouring into China and India and, comparably, the people going there are better educated and better prepared to spur the continued growth of those nations. Huge sums of money have shifted from investing here to investing there. We must repair our educational system at all levels to produce and attract people who can make a difference. If not we will see the investment money in this country dwindle. I don't know that it can be reversed.

  • Report this Comment On February 20, 2012, at 2:21 AM, CrankyTexan wrote:

    >>>Every time I visit I’m struck by the diversity and energy of the place. It’s a city of Asian-Americans, Latinos, African-Americans, Gays, Lesbians, and countless others all working together in an incredibly beautiful and prosperous city. Is it really a coincidence that Apple – arguably the greatest company in the world – emerged nearby such a melting pot? <<<

    What does diversity have to do with the economy? Another worthless liberal article praising our horrible economy during an election year.

  • Report this Comment On February 20, 2012, at 9:45 AM, TMFBane wrote:

    @CrankyTexan, I'd say that diversity has a lot to do with the economy. Here are two ways.

    First of all, diversity of background is more likely to lead to diversity of thought. And there have been quite a few studies that show that cognitive diversity leads to better business and investing performance. The WSJ reported in December 2011 that "immigrants have started nearly half of America's 50 top venture-funded companies and are key members of management of product development teams in almost 75 percent of the those companies." Clearly, diversity is a driver of innovation.

    Here's a second way in which diversity matters. I'm second-generation Irish, and my ancestors came over here looking for opportunity. They came over with nothing, but worked hard and were able to lift themselves into the middle class through sheer determination. Multiply that by tens of millions and you have the beginnings of a very powerful economic engine indeed!

    Politicians go on and on about American exceptionalism, but rarely do they try to define what that means. For me, we are exceptional in our diversity -- that leads to better ideas and more innovation. And economic opportunity also results in diversity as more and more people come here from foreign shores in search of the American dream.

    What does diversity have to do with the economy? I'd say quite a lot!

  • Report this Comment On February 20, 2012, at 5:41 PM, CrankyTexan wrote:

    A bunch of left wing San Francisco Nancy Pelosi style hogwash. There was plenty of diversity a few years ago when the stock market crashed.

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