At the same time the economy will only expand by 1.8% this quarter. The good news is, despite the economy, the S&P 500 has gained 3.7% since May 2017. Not too shabby, eh? In fact, as the graph below by Nomura shows, it’s only been over the last six months that the S&P 500 gained 10%. Yes, the market is “bad” according to our usual “wisdom”. As a comparison, the S&P 500 is 10.6% higher since January 2002. How are the numbers compared to the S&P 500 over the past 20 years? For 20 years there were 7 major financial crises, 3 world wars, and 23 recessions. In other words, there are a whopping 7 times as many major financial crises (27) than stocks (just 8). In fact, there were only three times as many major stock market crashes (6) before 2017. Now consider, the S&P 500 now has over 23% of the all time high and 12% of all time low in its history. In fact, if current history is any guide these are the most intense bull markets that the world has witnessed in its history. The market is set to be another major bull market.
It’s not going to be pretty. I’m sure you’re asking yourself, “But isn’t growth a good measure of an economy’s health?” Well, I’ll tell you my answer right now, but first I need to explain the problem with “growth.” There’s nothing wrong with growth per se. When the economy grows an economy is generating more stuff , more revenue, more wages, more benefits. It has value. But there’s only one thing that really matter at this point. What people want is to have a reason to buy more stuff . At this point in time we have nothing that satisfies their needs. And if there’s a better option out there, guess what it’s not that cheap. Just two thirds of the world’s population remains under-emphasized by their economies . That means there are not as many people with enough money left over to buy a brand new car. It also means the less prosperous people are not as enthusiastic about the stuff they do have.
In short, growth doesn’t correlate with actual success. It’s just a bunch of numbers, which when combined with demographics tells us they don’t correlate well. So, where do you find evidence that growth is a good thing? Well, there are two things to look for if you wish to bolster your case. One, there must be more stuff being produced than ever before. In other words, we have to be able to show someone who says “growth equals success” things that show that they’re just making out way too big a fool. And the second factor is that we live a much longer life than our forebears. Why are we living longer? It’s because our environment is changing. No, the rest of you, including Millennials, have no clue, but we’re a long way from the world of yore that was “just right.” Now back to the point. There’s no question the human race has vastly more stuff than our ancestors. But what we need is something that’s worth having. This, more than anything else, is what is missing in the modern world. There are so many things, from food to entertainment to technology, that add value to peoples living for today’s average citizen. What is it that they do need? It’s obvious! The problem, which I’ve tried to point out, is that what I’ve called the “value theory of everything” runs counter to the “growth theory of everything.” If there’s value to whatever we have, then there’s a value to the entire planet we have in the form of resources. So, what have we brought you today? Well, I started this with an interview with Bill Gates that starts off like a textbook in Value Theory. Then things got crazy. Because if you take a look around the world today just how crazy. For example, even the highest income earners in Japan (GDP per capita: $24,890) have a minimum of just around 200 items of income. You’d be surprised at how little there really is. On the other side of the planet, the Philippines has an even, far higher income per capita of $5,300. That’s on top of a GDP per capita that’s only $2,000!
So, what do we need? I’ll give you the answer right now, right?