Chart of the day

The recent development in the US is worrisome to many. Some are so concerns that they think US will turn into Zimbabwe or something like that. Many draw analogy of the fall of British Empire in the early 1900s. However, if we look at one of measurements of quality of life, GDP per capita, the UK overtook the US in 2008(in US $). Interesting indeed. The UK did not perform too badly actually though they were labeled as the sick man of Europe. FTSE 100 is generating 5% plus annual compound return over the last 25 years. Hence I think the fear is over-exaggerated.

The rise of the US has been interesting when I looked the following data(Year/GDP per Capita)

1820 $ 1,287
1900 $ 4,096
1950 $ 9,573
1973 $ 16,607
1993 $ 25,612
2008 $ 47,427

It took almost 50 years for the Americans to break the US $ 10,000(GDP per capita).



American took close to hundred years to get to where it is today. Their journey has not been smooth, they went through a Great Depression, two world wars, Great Inflation, Oil Crisis, the Korean War, the Vietnam War, etc........

Based on IMF number, China GDP per capita in 2008 ranked # 104 in the world, US $ 3,315. The base is almost like the US in the early 19 century. To expect them to break US $ 10,000 per capita within next 10 years will be unrealistic but the potential is enormous for the next 100 years. To expect China to sail smoothly without hiccups will not be realistic too. However, buy and hold a China Index fund in terms of relative return, in my view, will be a good bet. I will not zero weight advanced economies(underweight is possible) but certainly will overweight on China and Asia on the long term basis.

Need to have realistic expectations on China and also need to have a balance view of advanced economies and not just driven by emotions. A good investor is like what Mao said I don't care whether it is a black cat or white cat, as long as it catches a mice is a good cat. I don' care whether it is the US or UK or China, as long as it generates good returns will be my good friends - China is my best friend for now.