An Optimistic Article?
My blog topics tend to replicate my parenting skills, where I like to praise once for every 48 times I punish / criticize. So, having just finished my 48th critical article, I thought that I would share some ideas from a more optimistic article that I read recently.
Roger Altman (President Clinton’s Deputy Treasury Secretary and currently the Chairman of Evercore Partners) wrote “The Fall and Rise of the West” that was published in the current issue of Foreign Affairs. He identified five reasons to be optimistic about the United States:
1. The Housing Market – whenever this market has been pushed down far enough for a long enough period of time, it eventually rebounds. New home construction and sales of those homes fell by two-thirds after the bubble. In addition, banks have improved their mortgage underwriting standards. Securitization markets and household attitudes toward mortgages and home-equity financing have become healthier. Mortgage credit is more available. Finally, population growth will couple with a recovery in household formation to drive high demand.
2. New Technologies in Oil and Gas – we now have access to energy deposits that were previously unknown or inaccessible. Natural gas output is 25% higher than five years ago. The output of oil and other hydrocarbons rose by 7% in 2012 (the largest single year increase since 1951). The International Energy Agency projects that the U.S. will surpass Saudi Arabia as the world’s largest oil producer by 2017. This will create jobs and reduce oil imports.
3. The U.S. Banking System Has Been Recapitalized and Restructured – they have shed the bad assets and improved their capital and liquidity ratios. While outstanding loans are still below 2008, consumer credit started hitting new highs again in 2011.
4. The Great Recession has Spurred Greater Efficiencies in the U.S. Manufacturing Sector – unit production costs are 11% lower in the U.S. than ten years ago. Foreign competition is seeing their costs rise. Resurgence in housing is helpful because it drives demand for manufacturing. The decrease in energy prices will result in lower manufacturing costs (and greater competitiveness).
5. Increased Chances That Washington Will Fix the National Debt Problem – President Obama has cited deficit reduction as his top priority and the Republicans are finding that their anti-tax stance is not politically popular with the masses (according to Altman, who is a Democrat).
Never able to give unadulterated praise, I’ll rain a bit on this parade. I’m (by far) most excited about #2 (energy changes). I think #1 (housing recovery) and #4 (manufacturing recovery) are significant, keeping in perspective that both are still coming off deep drops. I’ll side with Dallas Fed President Fisher on issue #3 – we still need to end “too big to fail”, not just for the risk it creates but also for the unfair competitive edge that it gives to the largest banks. Finally, I disagree with #5 – I don’t see the political will to solve the debt issue. The hard decisions will involve how much we’re going to cut spending and / or increase everyone’s taxes (not just the taxes of the top income earners). I don’t see the political will to take on any of these issues or to reach any compromise.
I hope this can count as a positive blog. I feel somewhat dirty for having written it.
And speaking of dirty, I’m writing this blog in anticipation of the Super Bowl. I love the Super Bowl and I’m anxiously awaiting this game. I will give loads of credit to Jim Harbaugh for what he’s accomplished – although I’m just not a Jim Harbaugh fan. I really don’t have a reason – I just don’t care for him. (It’s probably similar to the way that many non-Alabama fans don’t care for Nick Saban.) That makes it a little difficult to root for SF. With that said, I could never cheer for Ray Lewis. I’m all for forgiveness. I guess, it’s just that I’m for forgiveness after some significant time in the penitentiary. He’s pled guilty to obstruction of justice in a (double) murder case. The idea that ESPN has hired him and that I’m going to have to listen to this criminal makes me sick. I’m going to be watching the Super Bowl with the remote in my hand so that I can mute the sound when the announcers start to praise this guy. Ugh.
As always, it’s tough being me.
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Sandy Leeds, CFA is a Distinguished Senior Lecturer at the McCombs School of Business at The University of Texas at Austin. He teaches graduate level classes in the MBA program and also serves as President of The MBA Investment Fund, L.L.C. Prior to teaching, he had careers as a lawyer and a money manager. He did his undergraduate work at The University of Alabama and also has a law degree from The University of Virginia and an MBA from the University of Texas. At UT, he has received many teaching awards, including Outstanding Professor in the MBA Program. He is married and has three children.
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