“A 20,000 foot view of the economy…”

 The New Bremen-New Knoxville Rotary Club heard from Edward Jones Financial Advisor and fellow Rotarian Randy Elsass who presented a big picture view of the economy.  Randy encouraged the group to think back about 18 months when companies like Lehman Brothers, Countrywide, A.G. Edwards, Wachovia, Bear Stearns, Indy Mac Bank and Washington Mutual were failing and the entire financial system was nearly frozen.  “Now fast forward 18 months…  The sky hasn’t fallen and the US economy and markets are still standing,” Elsass said.  “Politicians are playing the blame game and pessimism reigns supreme, yet the economy and markets are adapting and recovering.”  Companies are gone or no longer look like they did 18 months ago but the economy is recovering.  

“Don’t bet against technology,” Elsass said. “(Human flight in a machine) might be evolved by the combined and continuous efforts of mathematicians in from one million to ten million years.”  -from an article in The New York Times October 9, 1903 .  “We started assembly today.” - from the diary of Orville Wright, October 9, 1903 .  “Don’t bet against the free economy’s ability to react to changes in rules and regulations.  Understand business people respond to tax rule changes,” said Elsass.  “Our current US government will make changes and impose new regulations and rules governing US markets and our businesses will adapt and find ways to work within the new system, they always do.”  

Economic uncertainty and job uncertainty have caused a major shift in how the US consumer is spending their money now.  “Consumers are paying down their debt faster than before, they are buying generics, seeking lower pricing, and they are saving more,” Elsass said.  “Companies like Proctor and Gamble get it, look for the generic Tide laundry detergent to hit markets soon.”  Fannie Mae and Freddie Mac are now 80% owned by the Federal Government, and the push is on to keep people in their homes through various means of loan modifications and payment reductions.  “The US Government is rewarding behavior that should be punished, and punishing behavior that should be rewarded,” said Elsass.   

The United States economy no longer dominates the world economy like it once did.  “The world is becoming a much more competitive place, “ Elsass said.  “We’ve exported our competitive spirit to the rest of the world.  I was watching the US vs. Canada Hockey game Sunday and one of the commentators gave a quote that slapped me upside my head, You don’t understand what it takes to win the Gold Medal until you’ve done it.  Only 8% of President Obama’s cabinet has worked in the private business sector prior to their cabinet appointment.  That’s the problem with this administration, they are very bright, highly educated people with very little business experience.  These folks think they can change the rules of Economics 101 about supply and demand, and dictate price.  Obama’s 8% is the lowest percentage of the past 19 Presidents, the next lowest percent being President Kennedy’s cabinet at 30%.

 “The American public is very satisfied with the US health care system,” said Elsass.  “They are pushing back because the quality of our health care isn’t the issue.  For example, the percentage of men and women who survived a cancer five years after diagnosis:  US 65%, England 46%, Canada 42%.  The percentage of patients diagnosed with diabetes who received treatment within six months:  US 93%, England 15%, Canada 43%.  The percentage of seniors needing hip replacement who received it within 6 months:  US 90%, England 15%, Canada 43%.  The percentage referred to a medical specialist who see one within one month:  US 77%, England 40%, Canada 43%.  The American public is telling this administration to fix things like Medicare, Medicaid and Social Security before trying to take over 1/7th of the entire US economy in health care.” 

By 2020, baby boomers that are currently paying into Medicare, Medicaid and Social Security will be drawing from those programs.  This presents a “catastrophic problem for the US economy and our national debt,” Elsass said.  “Moody’s Investors Service recently said that the pristine AAA U.S. bond rating will come under pressure based on our deficit load.  US Treasury Secretary Timothy Geithner said that this will never happen to our country, yet this administration is doing nothing to reduce the Federal deficit.  Our current budget deficit of $1.6 trillion is 10% of Gross Domestic product, the highest it has been since the end of World War II.  It’s not the overall size of our debt that matters, but what percentage of our gross domestic product our deficit represents.  Once the baby boomers retire and begin collecting benefits from the US government the deficit could reach 77% of our gross domestic product, not far behind where Greece is now.  

“Don’t’ bet against technology, health care improvements and the American public,” Elsass said.  “The American people are not dumb, we understand what’s going on.  Don’t lose confidence in the markets.  If my clients had given in to their emotions back in February of 2009, they would’ve gotten out of the market just before it hit bottom in March of 2009 and missed the 45% growth they’ve enjoyed since then.  Investors are making back a lot of the money they’ve lost over the past 10 years.”  Randy Elsass is a financial advisor for Edward Jones in St Marys, 136 West Spring St .

Hosting Rotarian: Ron Riebel