[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]O[/dropcap]n January 18th, as the news outlets were predicting a recession for the United States of America, I had written that the converse is true. America’s economy was well equipped to handle the buffeting from a slowing China and a crash in Oil prices. Imagine my pleasant surprise when I read the Oracle of Omaha’s yearly newsletter!
In his most recent letter to Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B)shareholders, Warren Buffett wrote that politicians’ views of America’s future are “dead wrong.” Buffett believes that not only are we going to leave our children with an even better America than the one we inherited, but America’s economy will continue to grow and prosper for generations to come. Here is the complete letter for your perusal. Go ahead and give it a read! In simple language, Buffett lays out the rationale for his decisions.
The growth of Berkshire Hathaway has been nothing short of spectacular, as they have experienced a Compounded Annual Gain of 20% over the period 1965-2016 (51 years). Stated differently, your investment in Berkshire Hathaway shares doubles itself every five years! On September 3rd, 2011 BRK-B stood at $66.37 and today it is at $139.94 (at the time of writing) which proves that the stock did indeed double in a 5-year period. But I digress… This article is about the economy of America not Berkshire Hathaway.
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]S[/dropcap]tories have been swirling around that the United States is on the brink of a recession because of slowdown in China and Europe. This being an election year, one can’t help but notice GOP Politicians take one sliver of data that is convenient and make a mountain of it and say that the US is on the brink of disaster! The current bull run is 7 years long and as such one can expect a correction but recession? According to Buffett, definitely not.
Buffett goes on to say why the babies being born in America today are the luckiest crop in history:
American GDP per capita is now about $56,000. As I mentioned last year that – in real terms – is a staggering six times the amount in 1930, the year I was born, a leap far beyond the wildest dreams of my parents or their contemporaries. U.S. citizens are not intrinsically more intelligent today, nor do they work harder than did Americans in 1930. Rather, they work far more efficiently and thereby produce far more. This all-powerful trend is certain to continue: America’s economic magic remains alive and well.
Some commentators bemoan our current 2% per year growth in real GDP – and, yes, we would all like to see a higher rate. But let’s do some simple math using the much-lamented 2% figure. That rate, we will see, delivers astounding gains.