Making and Managing Money in West Virginia
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Transcript of Making and Managing Money in West Virginia
Anticipate the Future
“ A good hockey player plays where the puck is − a great hockey player
plays where the puck is going to be.”
Wayne Gretzky
Source: Bradford J. DeLong, Estimating World GDP, One Million B.C. – Present, available via the internet at Source: Bradford J. DeLong, Estimating World GDP, One Million B.C. – Present, available via the internet at http://econ161berkeley.edu, as reported in by International Monetary Fund, , as reported in by International Monetary Fund, World Economic Outlook, World Economic Outlook, Asset Prices and the Business Cycle, Asset Prices and the Business Cycle, May 2000.May 2000.
World GDP and Population
Average U.S. Household Income 1914-2004
Big Fish Small Pond Syndrome
During baby boomer era, “good” was good enough, when competition abroad was weak:
Ravaged by war
Constrained by centralized planning
Limited capital and human infrastructure
Source: Federal Reserve Bank of AtlantaSource: Federal Reserve Bank of Atlanta
Real Average Hourly Earnings
Rising Home Size and Declining Household Size, 1975-2009
Source: Source: The EconomistThe Economist, 3-31-2010, 3-31-2010 Source: Source: The EconomistThe Economist, 9-30-2010, 9-30-2010
Unsustainable Sources of Baby Boomer Spending
Source: FRB, JP Morgan Asset Management. Data includes households and nonprofit organizations. Personal savings rate is Source: FRB, JP Morgan Asset Management. Data includes households and nonprofit organizations. Personal savings rate is calculated as personal savings (after-tax income – personal outlays) divided by after-tax income. Employer and employee calculated as personal savings (after-tax income – personal outlays) divided by after-tax income. Employer and employee contributions to retirement funds are included in after-tax income but not in personal outlays, and thus are implicitly included contributions to retirement funds are included in after-tax income but not in personal outlays, and thus are implicitly included in personal savings. Savings rate data are as of February 2011.*1Q11 Household Debt Service Ratio is JP Morgan Asset in personal savings. Savings rate data are as of February 2011.*1Q11 Household Debt Service Ratio is JP Morgan Asset Management estimate. All other data are as of 4Q10.Management estimate. All other data are as of 4Q10.
Business Borrowing Binge
Source: Source: The EconomistThe Economist, 10-7-2010, 10-7-2010
While Most Americans Slept (or Spent):
Increased education of emerging market populations
Decreased centralized economic planning
Increased free trade agreements
Decreased cost of accessing information
Source: IMF *At purchasing-power parity, 2006 estimatedSource: IMF *At purchasing-power parity, 2006 estimated
Share of World GDP
U.S. Still Has Competitive Advantages
Source: Source: The EconomistThe Economist, 3-13-2010, 3-13-2010
U.S. Still Has Competitive Advantages
Source: Source: The EconomistThe Economist, 1-27-2011, 1-27-2011
Anticipating the Future
Irreversible game-changing forces will impact where the puck is going to be:
Demographics PoliticsTechnologyCompetition
Disclosures
McKinley Carter Wealth Services, Inc. (“MCWS”) is an SEC registered investment adviser with its principal place of business in the State of West Virginia. MCWS and its representatives are in compliance with the current registration and notice filing requirements imposed upon registered investment advisers by those states in which MCWS maintains clients. MCWS may only transact business in those states in which it is notice filed, or qualifies for an exemption or exclusion from notice filing requirements. Any subsequent, direct communication by MCWS with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of MCWS, please contact MCWS or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov).
For additional information about MCWS, including fees and services, send for our disclosure statement as set forth on Form ADV from MCWS using the contact information herein. Please read the disclosure statement carefully before you invest or send money.
Russell S. Sobel, Ph. D.Current Academic Positions James Clark Coffman Distinguished Chair in Entrepreneurial Studies, August 2005-
present Senior Research Advisor, Entrepreneurship Center, February 2006-present Professor of Economics, August 2005-present
Entrepreneurship Center Activities Director of the WVU Entrepreneurship Center from October 2002 until February
2006. Currently, serves as Senior Research Advisor to the WVU Entrepreneurship Center,
focusing on the link between entrepreneurial activity and economic freedom.
Professional Activities Research published in the Journal of Political Economy, Journal of Law and
Economics, Economic Inquiry, Journal of Economic Perspectives, Southern Economic Journal, Public Choice, Journal of Business Venturing, National Tax Journal, and Public Budgeting and Finance.
His edited volume on West Virginia policy reform entitled Unleashing Capitalism: Why Prosperity Stops at the West Virginia Border and How to Fix It was named winner of the 2008 Sir Antony Fisher International Memorial Award by the Atlas Economic Research Foundation.
Local Opportunities & Local Opportunities & The Rise of Global The Rise of Global
CapitalismCapitalism
Russell S. Sobel, Ph.D.Russell S. Sobel, Ph.D.
Professor of EconomicsProfessor of EconomicsJames Clark Coffman Distinguished ChairJames Clark Coffman Distinguished Chair
West Virginia UniversityWest Virginia University
What Explains Prosperity?What Explains Prosperity?
Is it Resources? Location? Democracy? Or ……Is it Resources? Location? Democracy? Or ……
Adam Smith’s Question:Adam Smith’s Question:Why Are Some Countries Rich and Others Poor?Why Are Some Countries Rich and Others Poor?
An Inquiry into the Nature and An Inquiry into the Nature and Causes of the Wealth of Causes of the Wealth of Nations (1776)Nations (1776)
Policies and the system of economic organization Policies and the system of economic organization (e.g., capitalism) matter more than things such as (e.g., capitalism) matter more than things such as resources, geography, education, democracy, etc.resources, geography, education, democracy, etc.
Rankings of Reliance on CapitalismRankings of Reliance on Capitalism
Capitalism & Entrepreneurship Capitalism works because it fosters the
decentralized process of entrepreneurship
Economist Israel Kirzner defines Economist Israel Kirzner defines entrepreneurship as the discovery of entrepreneurship as the discovery of previously unnoticed profit opportunitiespreviously unnoticed profit opportunities
Entrepreneurship & Creative Destruction (Joseph Shumpeter)• An economy undergoes continuous change An economy undergoes continuous change
some industries fail, others are bornsome industries fail, others are born• Number of combinations exampleNumber of combinations example
Our HomesOur Homes
Percent of homes with Heating & Air ConditioningPercent of homes with Heating & Air Conditioning19561956 = 6%= 6% 1996 = 81%1996 = 81%
Percent of homes with only one bathroomPercent of homes with only one bathroom19561956 = 71%= 71% 1996 = 9%1996 = 9%
And They are Better: Our ShowersAnd They are Better: Our Showers
Our CarsOur Cars
We now have DVD players, Air We now have DVD players, Air Conditioning, Anti-lock Brakes, Power Conditioning, Anti-lock Brakes, Power windowswindows
Our PhonesOur Phones
Our EntertainmentOur Entertainment
Our ScienceOur Science
Our ComputersOur Computers
MacBook AirMacBook AirLeast expensive-Least expensive-11-inch, 11-inch,
64GB, $999.0064GB, $999.00Most expensive- Most expensive- 13-inch, 13-inch,
256GB, $1,599.00256GB, $1,599.00
Our Video GamesOur Video Games
From Pong to Rock BandFrom Pong to Rock Band
Our MedicineOur Medicine
U.S. Life Expectancy has risen from 48 in 1900 to 76 todayU.S. Life Expectancy has risen from 48 in 1900 to 76 today
Our MusicOur Music
Policies & The Rate of Change The speed at which these innovations take
place is determined by the policy climate• In areas with bad policy things stay the same
for long periods – little progress• In areas with good policy the rate of change is
faster – more rapid progress
Changes in the rankings of global policy/ capitalism – US (falling) vs other countries (rising)
19751975
19801980
19851985
19901990
19951995
20002000
20052005
20082008
A Quick Tour of The A Quick Tour of The WorldWorld
Map of Economic FreedomMap of Economic Freedom
Example 1Example 1
A Country with VERY LOW Economic A Country with VERY LOW Economic FreedomFreedom
Zimbabwe (in Africa)Zimbabwe (in Africa)
Families in Zimbabwe (Africa)Families in Zimbabwe (Africa)
Families in Zimbabwe (Africa)Families in Zimbabwe (Africa)
Example 2Example 2
A Country with LOW Economic A Country with LOW Economic FreedomFreedom
Romania (in Europe)Romania (in Europe)
Families in Romania (Europe)Families in Romania (Europe)
Families in Romania (Europe)Families in Romania (Europe)
Families in Romania (Europe)Families in Romania (Europe)
Families in Romania (Europe)Families in Romania (Europe)
Families in Romania (Europe)Families in Romania (Europe)
Families in Romania (Europe)Families in Romania (Europe)
Families in Romania (Europe)Families in Romania (Europe)
Families in Romania (Europe)Families in Romania (Europe)
Families in Romania (Europe)Families in Romania (Europe)
Example 3Example 3
A Country with MEDIUM Economic A Country with MEDIUM Economic FreedomFreedom
India (in Asia)India (in Asia)
Families in IndiaFamilies in India
Families in IndiaFamilies in India
Example 4Example 4
Another Country with Medium Another Country with Medium Economic FreedomEconomic Freedom
Mexico (in North America)Mexico (in North America)
Families in MexicoFamilies in Mexico
Families in MexicoFamilies in Mexico
Example 5Example 5
A Country with HIGH Economic A Country with HIGH Economic FreedomFreedom
Hong Kong (in Asia)Hong Kong (in Asia)
Families in Hong KongFamilies in Hong Kong
Families in Hong KongFamilies in Hong Kong
Families in Hong KongFamilies in Hong Kong
Example 6Example 6
Another Country with HIGH Economic Another Country with HIGH Economic FreedomFreedom
United States (in North America)United States (in North America)
United States (in North America)United States (in North America)
The world is increasingly a dynamic and The world is increasingly a dynamic and diverse placediverse place
The profit opportunities in the global The profit opportunities in the global marketplace are different by country and marketplace are different by country and constantly changingconstantly changing
Locally focused business and wealth Locally focused business and wealth management strategies that worked in the management strategies that worked in the past are insufficient for the futurepast are insufficient for the future
Diversifying Globally U.S. policy changes have been moving
away from capitalism• Crony Capitalism• Unpredictability / Uncertainty
Global Opportunities:• Resource suppliers from foreign countries• Locations in foreign countries• Products for foreign markets• Customers (growing world middle class)• Personal investment portfolio
Food for Thought video
Thank You / Q&A
Contact Information:
Russell S. Sobel, Ph.D.Coffman Distinguished Chair
Dept. of Economics, WVU
(304) 293-7864