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The BMW Method
USA Still the Growth Engine

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By captainccs
January 31, 2008

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To add to Jim's optimistic outlook, let me say that I'm as convinced as ever that the USA is the growth engine of the world, even as India's and China's economies are growing faster. Both giant countries are coming out of decades of horribly misguided economic management under communism and socialism so they have probably a century worth of catching up to do. The same backwardness applies to most of Latin America, but only a few countries there are in catch up mode. Some, like mine, are going backwards under the banner of 21st Century Socialism.

Some people are worried that the USA is losing its edge to the developing tigers and others. I think this fear is greatly overblown and I will give just one example. A few years back the world was convinced that Japan had the leadership in consumer electronics and that this leadership was unassailable. Apple and Steve Jobs proved these skeptics wrong with the iPod. All of a sudden SONY's WalkMan is going nowhere. Another area where the USA has the lead that does not seem to be threatened by anyone else is in the digital industry: Amazon, eBay, Google, Yahoo!, and lots of smaller companies that are offering web applications of every sort.

What the USA is outsourcing and foreign sourcing are mostly the boring, repetitious, and low paying jobs. While this might hurt the working underclass, the unskilled, it also makes room for the highly skilled knowledge workers. The only reason so many foreigners can come to America to find high paying jobs is because Americans are not upgrading their skills fast enough. To my mind the current outsourcing of menial jobs is not too different from the earlier importation of minerals and other raw materials. In the old days Brazil produced the rubber and the USA produced the tires. While this arrangement was beneficial to both countries you could not argue that America was losing its edge to Brazil. The argument that somehow America is losing its edge to India and China is equally wrong.

But even in the industrial segment America is a leader in many cases. India and China don't have the equivalent of a Boeing and Peabody Energy is the world's largest private coal mining company. Who in Asia makes jet engines to compare with GE? Where are the Asian pharmaceuticals to compete with Amgen, Pfizer or Merck? This list can become very, very long but somehow people refuse to see these facts preferring to concentrate on how Johnny lost his help desk job to someone in India.

The economy is now more global than ever and, hopefully, all countries will participate (not that I have any hopes for the Islamic countries to join any time soon). In a global economy it's competitive advantage that counts. If what China has to offer is cheap labor and America offers knowledgeware, well, that's the way it is and there is no sense in pining after low paying jobs lost to China.

We need to use our competitive advantage. I believe that the BMW Method offers a terrific advantage over other ways of looking at the stock market, let's make the most of it.

Denny Schlesinger