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By Robert Johnson, CFA | 03-25-2013 12:00 PM

Johnson: Our Economic Flexibility Is Overlooked

In this special presentation touching on consumer spending, employment, natural resources, and more, Morningstar's Bob Johnson details how the U.S. economy can convalesce after tough times.

Note: This video is a recording of Bob Johnson's late-March presentation at Morningstar's Chicago office on the state of the U.S. consumer and economy.

Bob Johnson: Good morning everyone. It's great to be here today to talk about the economy a little bit, one of my favorite topics in the world. Today, we're going to cover a lot of ground. Let me start a little bit on the U.S. economy. My view of the world is, we've been through a very difficult time. We had a great 20-year growth period that was helped along by population growth, by growth in debt, and probably a little bit of a hyperactive housing market, and those things all came to a screeching halt almost together in 2008. And now we are slowly working our way out of that mess.

We've got one of the most flexible and adaptable economies in the world, and I think we are doing a very good job of coming out of the mess that we got ourselves into, as we always seem to. As I've said here, probably even to this audience before, sorry if I'm repeating myself, but I'm a product of the 1970s, and the '70s were such a disaster that this [current situation] looks like a walk in the park. We lost the war in Vietnam. We had a president resign in disgrace. We had gasoline prices go from $0.25 to $1 practically overnight. We had all sorts of food shortages and shipping grain to the Russians and creating all sorts of crazy inflation in the 1970s. New York City went bankrupt for all practical purposes. We were so much worse off then, than we are now, except we didn't have the media around to kind of trumpet all of that, so we probably didn't know how bad it really was unless in retrospect. And we recovered from that. And again, it took a while, it wasn't overnight, and some of it was painful. But we did get through it, and I think we'll get through it this time.

We are more flexible than almost anybody else in the world in terms of the economy, and that's an advantage that's so overlooked. I am an example of that flexibility. I mean, I was a sell-side stock analyst for years. I came to Morningstar as a salesperson. Then I worked as a manager of the technology research team, and now I'm an economist. I mean that's just the kind of normal flow of the world these days. That's not unusual. People don't stay doing what they're doing anymore, and if the jobs aren't there, people flex and move. One thing that I talked about last time, and now I've got some statistics to go with it, in the 1970s, when I grew up, nurses, about 2% of them, were guys, were males. Today that number as people have dropped out of construction and moved into other things, retrained themselves, today 11% of all nurses are now men and that percentage continues to go up, kind of an unbelievable statistic about how flexible we are in our economy.

And some of the economies just aren't as flexible. The guy who cuts my hair is Italian and he was back in Italy recently. He was asking his neighbors in Italy, his old neighbors, what was their biggest expense every month, and he said it was garbage. And he said they get their garbage picked up four times a week in Italy. I mean this is a country that is having trouble meeting various debt obligations and needs to cut back on the government. They are getting their garbage picked up four times a week. One day for this, one day for that, and come to the door and get the trash and they don't have the flexibility to say, "You know what, we are in tough times, we need to cut that down to three or blend one of these." That's some of the flexibility that we have in our economy that the rest of the world doesn't, and that flexibility goes far undervalued.

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