Progress in 5’s

I think daily minutia often blurs our capability to see the remarkable progress humankind has and is making. If we take a moment to think back 40 years, back to the time many of you started investing for the first time, we’ve seen tremendous advancements across the board. From energy to medicine, transportation to communication, or any one of a hundred other fields, advancement had been astounding.

But as investors it’s important to see the forest through the trees. So let’s break it down and consider a few special years – years that end in five.

1975

Saigon falls, President Ford escapes two assassination attempts within 17 days, Margaret Thatcher becomes the first woman leader of Britain’s Conservative Party, Saturday Night Live debuts, an American and Soviet Spacecraft dock in space, the event was memorialized by a 10 cent postage stamp.

Global Population: 4.1 billion – half who live in extreme poverty

US Population: 216 million

US GDP: $5.49 Trillion

S&P 500 year end closing value: 90.19

Earnings:  $7.71

Dividends:  $3.73

 

1985

Gorbachev comes to power in the Soviet Union and meets with President Reagan. The internet domain name system is created, Microsoft publishes Windows 1.0 and the first successful mechanical human heart transplant takes place. The song of the year was “We Are The World”, and the greatest marketing catastrophe since the Edsel, Coca-Cola introduced the “New Coke”. A first class postage stamp costs 22 cents.

Global Population: 4.85 billion

US Population: 238 million

US GDP: $7.71 Trillion

S&P 500 year end closing value:  211.28

Earnings:  $15.68

Dividends:  $8.20

 

1995

The Oklahoma Bombing is the greatest domestic terrorist atrocity in American history. O.J. Simpson’s murder trial begins, ending ten months later with an acquittal, Prime Ministers Yitzhak Rabin is assassinated. The Rock and Roll Hall of Fame Museum opens in Cleveland, Jerry Garcia dies, and a US Postage Stamp costs 32 cents.

Global Population: 5.7 billion

US Population: 266 million

US GDP: $10.27 Trillion

S&P 500 year end closing value:  615.93

Earnings:  $37.70

Dividends:  $14.17

 

2005

Hurricane Katrina devastates an American land mass larger than Great Britain, Saddam Hussein goes on trial for his life, July 7th becomes London’s 9/11 as coordinated attacks on bus and subway systems take 52 lives. Pope John Paul II dies. A postage stamp costs 37 cents.

Global Population: 6.5 billion – Globally, extreme poverty falls to one person in three

US Population: 296 million

US GDP: $14.37 Trillion

S&P 500 year end closing value:  1,248.29

Earnings:  $76.45

Dividends:  $22.38

 

2015

A radical Islamic faction, ISIS casts the Middle East into chaos, carrying out terrorist activities in Paris and San Bernardino, California. Refugees from the Middle East are pouring into Europe. The world’s leading nations reach an accord with Iran on its nuclear development program. Yogi Berra dies. The US Postage stamp costs 49 cents.

Global Population: 7.29 billion – less than 1 in 10 live in extreme poverty

US Population: 322 million

US GDP: $17 Trillion

S&P 500 year end closing value:  2100 as of 12/7/2015

Earnings:  $118 – estimated

Dividends:  $43 – estimated

 

So what does this four decade run down memory lane tell us?

• Global population is up nearly 80%, with extreme poverty slashed from one in two to one in ten, which will create a wave of new middle class consumers around the world.
• US Population has increased by nearly 50%, and gaining a new birth every 14 seconds, yet still almost unimaginable room to grow. Population density per square mile in America is 85 compared to 300 in France, 590 in Germany, 680 in the UK, and 870 in Japan. In America, we have so many unfair competitive advantages beginning with mineral rights that can be owned by landowners, that have created staggering natural resources. America has the potential to become the largest producer of oil and gas – currently estimated at 100 years worth of hydrocarbon energy reserves.
• Real GDP has more than tripled, yet with only a 50% increase in our population – this means real GDP per capita has soared.
• The S&P 500 rose more than 20 fold, on earnings increases of over 15 fold, and dividend increased 12 fold. These increase lapped the increase in general goods and services, or inflation, which has increased four and a half fold.
• This has been the greatest 50 Year accretion of real wealth by the greatest number of people in the history of the world.

I think there are two trends that underpin this spectacular progress:

1. Fundamentally the spread of the free market as liberty from communism and socialism rose in other parts of the world. Capitalism has prevailed.
2. The exponential progress in information technology. Today your iPhone has more computing power than the ones NASA used to put a man on the moon.

This cycle of progress and innovation will not stop. It is foolish to believe technological innovation is topping out. Be encouraged, look at all the great opportunities for advancement and progress in our world and our future. Great companies and great people in those companies are working every day to improve the lives of people around the world. Great fortunes will be made by those who bring value to others in the world and their future.

Thank you for investing your time today with this ProsperOn, and thank you for being a client of Prosperion Financial Advisors.