U.S. Economy: Who Has All the Money?

Where is all the money going in the U.S. economy? Mitchell tells you which industry is the outperformer right now.It’s a slow-growth economy across the board, and it’s going to stay that way for quite a while longer. So, investors have to play the hand that they’re dealt.

I’ve found over the years that it’s very useful to ask simple, common-sense questions about the economy, and the answers can really help sharpen your stock market outlook. For example, ask yourself: who is doing well in this economy? Which industries are growing faster than others? Which companies have all the money? You might be tempted to think the answer to the first question is a windmill repairperson (which, by the way, is the fastest-growing trade), but I ask these questions at the corporate level in order to make better investment decisions in the stock market.

When I break it all down by industry and individual companies, I keep coming up with the same answers—gold miners. Yep, the mining industry is the outperformer in this economy and, for the most part, none of us will ever see the industry up close.

Right now, the gold mining industry has a lot of money, and has the fastest growth in revenue and earnings, and, in my view, the best potential for outperforming all other industries over the coming quarters. It’s a tough business to get your head around because most of us don’t live beside an open-pit mine in a far off land, but the mining business is integral to the industrial economy and to consumers. And now that we have debt and currency troubles, the store of value argument is coming back into play.

The great thing about the gold mining business is that it only really depends on two things: the amount of gold in the ground and the spot price of the commodity. The gold mining business doesn’t really care about the employment situation or housing prices; even the prevailing level of interest rates is less important. Once a miner has poured a bar of gold, he or she does not ever need to worry about selling it. Someone will buy it at a certain price no matter what. This is a fundamental difference between mining for precious metals and other industries. There is always a market for your product if you can find it and get it out of the ground.

From the investor’s point of view, because the gold mining business is one of the strongest in the global economy at this time, it makes sense to consider investments related to the industry. And it doesn’t even need to be the miner itself. How about investing in a business that makes mining equipment or a money manager that sells gold funds?

The domestic economy is in a period of slow growth, because it is still trying to balance itself out after a long period of excess that was mostly fuelled by debt. There’s no need for an investor to rush out and invest in any business because of this. As I say, I always find it useful to regularly ask the simplest of business questions. It used to be that the banking industry had all the money; now gold miners do.