What Is the United States Net Worth?

“We’re bankrupt, we just print money out of thin air” 

“Our National Debt is so big we’ll never pay it off, we are insolvent” 

“If I operated my family finances like this we’d be in bankruptcy court” 

These are things you hear on Twitter, in certain media outlets, blogs, maybe even from your friend at the club. We have huge debts, owe a ton of money to things like Social Security and Medicare therefore the United States must be in dire financial straits. 

Are we though? Is our nation bankrupt? Let’s do a thought experiment: what might the Balance Sheet of the United States look like? 

Liabilities: We’ll start with the ugly part, what are our liabilities? 

According to the National Debt Clock we owe just north of $28T dollars. Man, that seems like a lot, I owed $525 on my last Amex bill and I couldn’t sleep at night.   

We also have unfunded liabilities like Medicare and Social Security. There’s no exact answer for this but let’s say, conservatively, that it’s $200 Trillion (I’m including federal and veteran benefits here). 

Let’s also use a catch all category of “other” and say that’s $5T. We owe things to people and places and we’ve guaranteed things and this is my guess for all of that. 

Total Liabilities: $233 Trillion. 

Assets: What are the assets of the United States? Every balance sheet has both liabilities and asset so what are ours? 

The United States Government owns physical and financial assets. Let’s do physical first. 

The BEA has calculated that the land we own is worth roughly $1.8T and the natural resources on and offshore at around $125T (water, timber, silver, copper, oil, etc). We also own about $450B in Gold and $1.4B in properties and inventories. 

I’m also going to use a “other” category here because I guess we could sell aircraft carriers or planes or military equipment we own.  Let’s call that $10T. 

Now how about financial? 

The US holds close to $1.5T in Federally backed student loans and about $2.2T in cash and other investments (data from US Treasury). 

Total so far is about $142.3T, still below what our liabilities are. 

Now let’s get into two things that aren’t as concrete but incredibly important to our nation’s balance sheet. 

What is the value of all the human capital in our education system? All the students some of which might be the next Steve Jobs or Jeff Bezos who go on to create the next Apple or Amazon. What about all the inventions sure to occur in the future or all the discoveries like mRNA vaccines? This is hard to calculate but for the purposes of my blog I’m going with $100T. 

What is the value of the ability to tax the most productive private sector the World has ever known? Our government can not only tax the people in its nation but the companies operating inside of it. What is that worth? This is super, super hard but I’m going with $300T. It’s probably way more but let’s just go with that. 

Total Assets: a little over $542 Trillion. 

Final US Net Worth:  +309 Trillion

Yes, we owe money. Yes, people like to use “debt” to scare you. Yes, my last two assets are hard to value, but I promise you that our nation is not bankrupt. 

We are likely one of the wealthiest nations in the history of the World (if not THE) and our economy and its workers are incredibly productive. 

Can you tell me how many people you know that have gotten rich betting against the United States of America? I don’t know any. 

Our economic might, our rule of law, our innovations, our workers drive the stock market regardless of our level of debt. Don’t lose sight of the long-term prosperity we’ve all benefitted from because it’s going to exist far into the future. 

You Do You

I’m going to come right out and say this: pineapple on pizza is good. You know what else is good? Cholula on eggs, jalapenos in Margaritas, peanut butter on hamburgers, and dipping fries in ranch. 

You might think those are gross, in fact even mentioning pineapple on pizza is bound to land someone in a 30 minute argument with a pizza purist. But you know what? I don’t care, I like it, and that’s all that matters. I’m doing my thing here with food because it suits who I am, just like my investments. 

I have a diversified portfolio of bonds and equity funds that I’m using to reach my goals. I also own a handful of single names because I believe they are good companies, with great leaders, growing their business over time and I want to participate in that.   

These investments are going to be held for DECADES, I am using them to help pay for college, retirement, and future medical costs. Why do I care what happens to the price of Apple or Disney or the S&P500 today, tomorrow, next month, or next year? I am playing my game and my game only. 

The biggest trap investors fall into is looking at someone else’s game and saying “what’s going on over there, should I be on their playing field?”   

“This person on TV said Apple is overpriced”. Ok, great, is it overpriced for a day, a week, a month, a year, 10 years? Time frame matters to this statement. Do you think the people on financial television know what strategy you are employing to reach your goals? 

Day traders care what happens to the price of Apple today or tomorrow. Other traders might care what happens to the price this week or next. Portfolio Managers might care what happens to it over the next few quarters or a year. All of these people are looking at the price of a stock or an index and attaching their strategy to it. 

Should you care that I like pineapple on my pizza? No. Should you care what a day trader thinks the value of Apple should be tomorrow when you are invested in it for different reasons?   

How many times a week do we think Warren Buffet opens a web browser and frets over the price of his holdings? Zero or Zero? He built a strategy that was inside his circle of competence and sticks to it for the long run.   

Does he add and subtract along the way? Absolutely, in fact when the market crashes he rushes in to find deals while everyone else runs out of the store. But he is thoughtful about executing HIS plan and filtering out what other investors are doing. 

I’m not saying there’s never a reason to be worried about a stock or an investment, I’m saying that you need to be focusing on your game and not someone else’s. If your reasons for owning something change then fine, at least you aren’t looking at what other people are doing and assuming they are right. 

Literally no one knows what the future holds, especially in the stock market. Why? Because it’s a complex adaptive system where tiny changes cascade through the system altering its course instantly.  Subtle changes in expectations happen nonstop so it’s literally impossible to know what future prices will do.   

Imagine a room of forty 3-year-olds stuffed with toys and candy and obstacles and juice boxes, do you think you could predict what they will all do? Each one of them is changing their behavior every few minutes, bouncing from thing to thing, going right and then going left. It’s the same with stocks. 

Since that’s the case the best you can do is have a plan that is true to who you are and stick to it.   

Stop looking at what other people are doing and focus on yourself. You do you.  

The Story Comes Alive

Take a look at this picture and tell me what you see. 

You probably see rocks and sand colored with a red hue.  You might also notice a tiny speck that looks like a fly in the air.  Let’s zoom in on it.

Is it a fly?  Looks like one right.   Let’s try one more picture:

That right there is Ingenuity, a helicopter NASA sent to Mars alongside the Perseverance rover. The picture at the start of this blog was the 4th flight of Ingenuity, 188.47 million miles from Earth.

Humanity has achieved flight on another planet.

On December 17, 1903, two brothers from Dayton OH made four brief flights at Kitty Hawk NC and no one noticed. I’m serious, literally no one cared at all. It took the better part of 5 years for anyone to register what they had accomplished. Everyday people were going about their lives as mankind finally left the confines of Earth to soar among the birds.

Onboard Ingenuity is a small swatch of fabric from the first plane the Wright Brothers flew. Imagine what they would say knowing a tiny piece of their plane would fly on a red dot in the night sky only 118 years later.

It’s been a difficult start to the decade, we’ve lost over 3 million people Worldwide to a disease that swamped our economies and stock markets. For many, 2020 will be thought of as one of the worst years ever, and even now COVID still rampages across the globe.

But as darkness threatened to envelop us, humanity answered the call. We created new mRNA-based vaccines faster than anyone could’ve imagined because that’s what we do, rise to meet challenges. We create new technologies, new ways of thinking, new ways to treat the sick, and quite literally change the future. Vaccinations will spread, hard fought immunity will be achieved, and this chapter will close.

Think of all the everyday things WW2 spawned, another gut-wrenching moment in our history: penicillin, jet engines, synthetic rubber, the microwave oven, computers, just to name a few. It is only when things are the hardest that we take our biggest steps forward.

You might not care that we have a helicopter on Mars, and you might not think it’s a big deal that we’re driving an expensive toy over some rocks millions of miles away. You have bills to pay, the World seems as divided as ever, someone told you inflation could rise, and the stock market might crash.

While the tempest rages on Earth, a group of scientists are taking huge leaps forward on behalf of humanity. It might be hard to see why a helicopter on Mars matters but it’s always been that way. We can’t predict what will happen in the future any more than the people in 1908 could predict how Wilbur and Orville’s invention would change the World.  

I implore you, for just this one moment, stop worrying about money or politics or a disease we will BEAT, and let optimism about the future wash over you. Put aside your earthly cares and dream like you used to as a child about all we can accomplish when we put our minds to it.

A piece of the Wright brother’s flyer took to the skies of Mars. It’s enough to make my spirit soar alongside it.

The story comes alive. 

The Most Important Question

We all have firmly held beliefs about money and investing. These beliefs are a product of who we are, when we grew up as investors, who our role models were, and what kind of worldview we have. 

Morgan Housel once said: “How people manage their money is a window into what they value, who they want to impress, what they think they’re good at, what they’re clearly awful at, what they’re insecure about, and where they see the world going.” He’s right, who you are as an investor is as unique to the World as who you are as a person.

Whether you’re aware of it or not, you view the world and the market through your own lens, amplified by your experiences, which help guide the decisions you make when investing your money.

All of us want to believe that our view of how the World works (or should work) is the right one.

So here is the most important question to ask as an investor:

If you had to choose, would you rather be proven right or make money? 

Said another way, are you willing to hold so tightly to what you think should happen in the market that, even when proven wrong, you won’t change your mind?

I field questions all the time that are a product of someone trying to come to grips with how their worldview mixes with investing. 

If this person becomes President won’t that bad for the market?”  

“How will we ever pay back the National Debt, aren’t we stealing from our children?”

“Isn’t the Fed distorting markets?”

“Won’t the dollar be worthless if we keep printing money?”

All questions that are born out of a need to understand how the World and markets intersect.

But here is what I need you to understand about the stock market: it is a relentless discounting machine that continually processes information with no regard to how you think it should act.

It looks at a piece of news, or an event, or a tax proposal, or an election and says “got it, what’s next?” It does this nonstop, day in and day out. It doesn’t care what people THINK should happen: it just digests the news, adjusts to the most likely outcome, and moves on. It doesn’t care if you love or hate the Fed, and it doesn’t remember the “good old days” of investing.

If you are talking about a worry to a friend, or your advisor, believe me, the market KNOWS and has been discounting it.

Look, we all want to be right, believe me, I once said that I’d live to see another Chicago Bears Super Bowl, so I know what it’s like to hang on to a view.

You simply cannot let your desire to be proven right impact your ability to make money, they are two different things, and I don’t want you falling into a trap of your own making. 

(While you’re here, I‘m starting a new series called “Quick Takes” on Baird’s Youtube channel, check out my National Debt video or my short hit about selling stocks because you’re afraid of something. More great topics to come!)

FOMO (Fear of Missing Out)

“Can I keep everyone focused on the big picture and their true financial objectives in get rich quick environment that’s turned the markets into a 24 hour virtual casino?” – Downtown Josh Brown

My friend Josh Brown celebrated his 44th birthday on February 25th (Happy birthday Josh) and he wrote that sentence on his blog. It got me thinking about myself, the markets, Baird’s clients, and how we’ve entered this weird World where NBA highlights are selling for thousands of dollars and lines of computer code are worth $50,000 a “coin”.

Now look, I’m not here to rage about that or tell you those things are obvious bubbles. First, who am I to say anything is a bubble and second, if a bunch of people think something is true that is a powerful force. Homes, Bitcoin, NBA Highlights, Digital Art, Gold, Stocks, these kinds of assets (whether they are physical or digital) have value because other people agree they do, and the “price” of something is what other people are willing to pay for it not some future cash flow times a discount rate.

Instead, I wanted to use this blog to examine my own FOMO and some of the stories I’m hearing about people with well diversified financial plans seeking to chase fad investments because one of their friends at the club said they made a ton of money on Stellar Lumens (I literally have no idea what that is but apparently it’s a thing).

It’s really hard to watch other people get rich and not want to join in, especially in this version of the World where throwing money at something requires pushing a button on a phone. Magnify that by the fact that we are ensconced in a 24-hour social media cocoon where people flaunt their “gainz” like they are Cortez who just discovered the New World. 

I’ll admit, I get FOMO badly. Why? Because I’m a human being and I have a brain wired for things like envy, greed, and gluttony (I ate half a bag of Cheetos the other day).

The question you (and I) need to ask ourselves is “what kind of an investor am I?” How have I acted in the past because that’s probably the best indicator of how we’ll act in the future. 

Did you sell in March 2020 because you couldn’t handle the COVID crash? Did you let politics impact your portfolio last November? If you answered yes to one (or both) how are you going to handle the unprecedented volatility of high beta Growth stocks or crypto? If stock market selloffs and political views can make you course correct are you really geared to invest in stuff like this?  

Bitcoin, for example, has had multiple 60% drawdowns in the past three years and 30% selloffs are fairly common. What would happen to the value of digital collectibles if all of a sudden people get bored with them? 

Growth stocks, which have caused many investors in well diversified plans to chase them due to FOMO, are getting smashed right now because the market is expecting economic growth to SOAR in the near future and that style of investing would be out of favor. What if you end up with a portfolio of stocks that goes nowhere (or down) while you watch the economy BOOM because that could happen if you’re in the wrong names.      

Advisors have a fiduciary duty to their clients to act in their best interests, that means setting investments to meet the goals of a financial plan. If the plan has changed to “I want to get rich quickly on fad investments and chase the hottest sectors of the market” how can those two plans co-exist alongside the fiduciary responsibility?

That being said, there is a more nuanced take to all of this. If you’ve meticulously funded your big picture with a well-diversified plan, basically committed to eating your peas and carrots, it’s ok to dive into that ice cream sundae from time to time, just do it responsibly. 

Again, we are only human, we don’t live in financial planning software, if you’re seeking to scratch an itch you must understand that risk and return go hand in hand, so do it in a way that doesn’t threaten your goals.

The absolute best investors have learned to ignore FOMO, in a perfect World no one would care what their friends are invested in or how that person on TikTok did in Gamestop. Warren Buffett once said It’s insane to risk what you have for something you don’t need” and he’s right, make smart decisions with your money not ones driven by emotion.