The United States frequently frustrates me. Its potential for creating wealth is great; much greater than most people realize.
I say that because our country, as much as any, is peppered with entrepreneurs. But unfortunately and inevitably, politics and politicians thwart their ability to create wealth at full potential. Politicians everywhere and always raise cost and create uncertainty. (Look no further than Obamacare and quantitative easing).
Still, the United States remains my preferred investment market, and it's the one I spend most time vetting.
Despite the government continually tossing obstacles in the way, our irrepressible entrepreneurial spirit survives and keeps the needle moving forward. We continue to lead the world in many businesses: technology, medicine, media come readily to mind.
Now with the quantum leap in horizontal fracking, we will soon lead the world in energy production – and possibly manufacturing once again.
The natural-gas boom has dramatically lowered the cost of running energy-intensive factories. More companies are decamping oversea locales to return to the American hinterland. (The December 2012 edition of The Atlantic offers an excellent account of America's manufacturing renaissance.)
The United States' economic advantages become more apparent when considering the alternatives.
The European Union (EU) suffers from sclerosis and shrinking populations. Germany's population has shrunk every year since 2006. Its economy grows at half the rate of the United States…and that's the EU powerhouse.
As for Japan, its economy barely grows 1% each year – and that's been the case for the past 10 years. Moreover, its central bank is even more reckless than our own, having promised to pump $1.4 trillion worth of yen into an economy that's a third the size of the United States.
China is an option, but I don't believe a better one. To be sure, its 7.5% annual GDP growth dwarfs our own. But China's growth rests on a shaky, highly leveraged financial system and massive government-directed infrastructure and housing projects.
China's grotesque one-baby-per-couple policy is another deterrent. This has led to a surfeit of boys and a dearth of girls. Males outnumber females by 78 million. The ratio is even more lopsided among the young and the fertile. A country composed of frustrated males hardly ensures social stability over the long run.
Other emerging markets, especially those between the Tropics of Cancer and Capricorn, leave me cold.
Wide swaths of India remain mired in grinding poverty and unconscionable bureaucracy. U.S. bureaucrats are appallingly intrusive and inefficient, but things still get done. India's bureaucrats take intrusiveness and inefficiency to stratospheric heights. The World Bank ranks India at132 in ease of doing business and at 173 in ease of starting a business (on a 1-to-185 scale). In comparison, the United State ranks 4 and 13, respectively.
Africa has become an investing novelty, but one likely to flame out in the near future. In Africa, like in China, the bulk of investment is in infrastructure, energy and agriculture – the grand schemes that aggrandized the political class and are prone to booms and busts. In addition, Africa's near-sighted and stagnating propensity to export raw materials in exchange for final consumer good continues unabated.
Other emerging economies, particularly those in South America, remind me of an unlucky woman caught in a perpetual state of parturiency: These countries are always about to emerge, but never do. A demagogic caudillo is always waiting in the wings, ready and determined to derail any economic progress.
In short, the world's economies remind me of a hamper full of dirty shirts. None are clean, but the United States is the cleanest of the dirty bunch. More important, the United States' shirt still has the most clean patches that investors can readily exploit.