Most economists are fond of measuring prosperity in terms of GDP. But according to Rob Arnott of Research Affiliates as cited in Fortune, that may not present a true picture of economic growth:
GDP that stems from new debt — mainly deficit spending — is phony: it is debt-financed consumption, not prosperity,” Arnott writes. “Net of deficit spending, our prosperity is nearly unchanged from 1998, 13 years ago.
The whole article is worth a read-and some serious thought. (It is perhaps of interest to note that the Value Line Geometric Index had a peak around 1998 also.)
Source: Yahoo! Finance
The implications for investment markets may be profound. If real prosperity is not to be found in the US at the moment, it may be necessary to broaden your investment horizons, both overseas and to different asset classes. Strategic asset allocation with a US core may need to be cast aside in favor of a more flexible tactical asset allocation approach. Relative strength, of course, is one good way to determine where returns are being made.
