Contrarian Investing: Go Long America!

Guest editorial in this weeks Barrons.  Excerpt with my highlights:

By JOSEPH QUINLAN

The U.S. is No. 1 for the foreseeable future.

.....From the ashes of the U.S.-led global financial meltdown, a new world order is in the making. According to popular opinion, America is declining, while China is rising.  The consensus could be wide of the mark. Yes, there is plenty wrong with the U.S. The economic challenges before the nation are Herculean. Yet there is plenty right with America. The country has the critical endowments -- if deployed and nurtured properly -- to emerge from the recession stronger than ever.

The U.S. economy is the largest and most productive on the planet. With just 4.6% of the global population, the U.S. accounts for roughly one-quarter of global output, generating more output in a year than the next three largest economies (Japan, China and Germany) combined. America's economy is three times the size of China's; the per capita income of China is only about 10% of that of the U.S.

The United States is a manufacturing superpower; we're still in the business of making stuff, despite incessant reports to the contrary.....The U.S. makes more goods in a year than any other country, although America's share of global manufacturing output was roughly 17.5% in 2008, down from 22.4% in 1990 and about 20.5% in 1980.

Many U.S. manufacturers have held their own the past few decades, even in the face of stiff competition from Japan, Germany and China......most of China's gains came at the expense of Japan, South Korea, Mexico and others -- not the U.S.   The largest exporter in the world is neither Germany nor China. It's the U.S., despite annual trade deficits and all the chatter about U.S. companies not making anything the world wants to buy.

Yes, China is the largest exporter of goods in the world. But why count only goods? Why not count services?  Thanks to falling communication costs and the ubiquity of the Internet, global service exports have soared the past decade, with the United States in the forefront. U.S. exports of "other private services" -- including data-processing, accounting, medical services and telecommunications -- totaled $252 billion last year. When goods and services are combined, U.S. exports top all others, totaling $1.5 trillion in 2009, or nearly 10% of the global total. Germany, with 8.5%, ranks second.

The U.S. remains the world's preferred destination for foreign direct investment.....Cumulative foreign direct investment in China from 2000 to 2009 was $666 billion, just a little more than one-third the total invested in the U.S. by foreigners.  America's global share of foreign direct investment was 16% in that span, versus 6% for China. The noisy debate about U.S. outsourcing should be balanced with a more intelligent debate about U.S. insourcing.

The U.S. remains one of the world's technology leaders, with a culture of innovation second to none. America is at or near the top of the charts when it comes to scientific research institutions and corporate spending on research and development......Yes, China and India are rapidly moving up the technology curve. The two are graduating more scientists and engineers each year relative to the U.S. Various studies, however, have questioned the quality and employability of these graduates. 

In general, the quality of higher education in China, India and many other parts of the world remains poor. That stands in stark contrast to America's system of higher education, the best in the world. ....One-fifth of all international students in post-secondary education in 2007 came to the U.S., making it the top destination for foreign students.

America is home to the world's top global brands. According to the research firm Interbrand, more than half of the Best Global Brands of 2009, ranked by brand value, were American. Other critical strengths include America's expanding population -- we are a youthful nation, relative to Europe and Japan......

.....The U.S. is not an economic clunker. Investors infatuated with China and other emerging markets should reconsider. Now may be a great time to go long America.

Link:  Go Long America!