Growth That Matters

Brit Ryle

Posted December 23, 2022

We all like to see the stocks we invest in move higher over time. So we seek out companies that are growing, that sell more products from one year to the next. Because companies that sell more, well, that’s the best way to make sure you’re benefiting from the rising revenue and earnings that typically lead to higher stock prices.

Growing companies tend to invest money to grow their production capacity to satisfy rising demand. They build factories, open offices and hire people. 

More people with good jobs means that when it’s time for you to sell your house, you’ll find a buyer willing and able to pay more for it than you did. It means more people paying taxes to support the military that protects us, the infrastructure that sustains and the social security programs that provide some stability in retirement.

Much of the prosperity Americans enjoy now and expect to enjoy in the future is dependent on the growth of one thing: the U.S. population.

And as it happens, the U.S. is one of just a handful of developed countries that actually has a growing population. In fact, a look at the population growth trends for the richest countries in the world, it’s more than a bit worrisome…

American Economic Growth Globalization

Source: Peter Zeihan on Twitter

This graph depicts what the populations of the wealthiest countries will look like in 2030, minus the U.S. Population growth rates for these countries have been declining since 1980. Which means lower spending and consumption can be expected from each succeeding age group. 

The implication for investment is pretty clear. Companies operating in Europe, for instance, are going to have a harder time growing their revenue in a meaningful way over the next 8-10 years simply because the number of potential customers is in decline. 

But as American companies turn their back on globalization, move out of countries with elevated geopolitical risk (like China) and bring supply chains and manufacturing operations back to the U.S. and North America, we are at the start of a new era of American prosperity. 

New factories are already breaking ground. The next generation of high-performance semiconductors will be Made in the U.S.A. Manufacturing centers abandoned by globalization will rebound. Millions of jobs will be created…

I’ve dubbed this unstoppable trend The Second American Industrialization. And it's starting with semiconductors…

The Chips Act of 2022 passed in July and provides $52 billion in incentives for companies to bring semiconductor manufacturing to the U.S. 6 months later, and companies like Qualcomm, Taiwan Semiconductor and AMD have announced nearly $200 billion in spending to build new manufacturing centers and expand existing ones. 

Semiconductors are the tip of the iceberg. Expect to see consumer electronics manufacturing surge in the U.S., to be closer to the supply. Next generation chips will feed a blossoming American electric vehicle market. New mining operations to supply the raw materials (like lithium), massive growth for natural gas production and Liquified Natural Gas (LNG) capacity to feed Euriope. Investment in renewables will march on…

Most investors remain focused on inflation, interest rates and the potential for recession. Very few are able to see beyond the next few months. And when investors do look ahead, all they can see is a looming recession for the U.S. economy…

I can’t tell you whether there will be a recession. But I can tell you that nothing in the economic outlook for the next 6 months will stop the supply chains from coming home, the new factories being constructed and a couple million jobs being created.

And so if the economy does fall into a recession, it will be the Second American Industrialization that lifts us out. And you and I will be ready. 

With that I’m going to sign off for today and wish you and your family the very best this holiday season. Get an early start because 2023 will be a year worth celebrating.

Briton Ryle
Pro Trader Today