Making and Managing Money in West Virginia

Anticipate the Future

“ A good hockey player plays where the puck is − a great hockey player

plays where the puck is going to be.”

Wayne Gretzky

Source: Bradford J. DeLong, Estimating World GDP, One Million B.C. – Present, available via the internet at Source: Bradford J. DeLong, Estimating World GDP, One Million B.C. – Present, available via the internet at http://econ161berkeley.edu, as reported in by International Monetary Fund, , as reported in by International Monetary Fund, World Economic Outlook, World Economic Outlook, Asset Prices and the Business Cycle, Asset Prices and the Business Cycle, May 2000.May 2000.

World GDP and Population

http://econ161berkeley.edu/

Average U.S. Household Income 1914-2004

Big Fish Small Pond Syndrome

During baby boomer era, “good” was good enough, when competition abroad was weak:

Ravaged by war

Constrained by centralized planning

Limited capital and human infrastructure

Source: Federal Reserve Bank of AtlantaSource: Federal Reserve Bank of Atlanta

Real Average Hourly Earnings

Rising Home Size and Declining Household Size, 1975-2009

Source: Source: The EconomistThe Economist, 3-31-2010, 3-31-2010 Source: Source: The EconomistThe Economist, 9-30-2010, 9-30-2010

Unsustainable Sources of Baby Boomer Spending

Source: FRB, JP Morgan Asset Management. Data includes households and nonprofit organizations. Personal savings rate is Source: FRB, JP Morgan Asset Management. Data includes households and nonprofit organizations. Personal savings rate is calculated as personal savings (after-tax income – personal outlays) divided by after-tax income. Employer and employee calculated as personal savings (after-tax income – personal outlays) divided by after-tax income. Employer and employee contributions to retirement funds are included in after-tax income but not in personal outlays, and thus are implicitly included contributions to retirement funds are included in after-tax income but not in personal outlays, and thus are implicitly included in personal savings. Savings rate data are as of February 2011.*1Q11 Household Debt Service Ratio is JP Morgan Asset in personal savings. Savings rate data are as of February 2011.*1Q11 Household Debt Service Ratio is JP Morgan Asset Management estimate. All other data are as of 4Q10.Management estimate. All other data are as of 4Q10.

Business Borrowing Binge

Source: Source: The EconomistThe Economist, 10-7-2010, 10-7-2010

While Most Americans Slept (or Spent):

Increased education of emerging market populations

Decreased centralized economic planning

Increased free trade agreements

Decreased cost of accessing information

Source: IMF *At purchasing-power parity, 2006 estimatedSource: IMF *At purchasing-power parity, 2006 estimated

Share of World GDP

U.S. Still Has Competitive Advantages


Anticipating the Future

Irreversible game-changing forces will impact where the puck is going to be:

Demographics PoliticsTechnologyCompetition

Disclosures

McKinley Carter Wealth Services, Inc. (“MCWS”) is an SEC registered investment adviser with its principal place of business in the State of West Virginia. MCWS and its representatives are in compliance with the current registration and notice filing requirements imposed upon registered investment advisers by those states in which MCWS maintains clients. MCWS may only transact business in those states in which it is notice filed, or qualifies for an exemption or exclusion from notice filing requirements. Any subsequent, direct communication by MCWS with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of MCWS, please contact MCWS or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov).

For additional information about MCWS, including fees and services, send for our disclosure statement as set forth on Form ADV from MCWS using the contact information herein. Please read the disclosure statement carefully before you invest or send money.

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Russell S. Sobel, Ph. D.Current Academic Positions James Clark Coffman Distinguished Chair in Entrepreneurial Studies, August 2005-

present Senior Research Advisor, Entrepreneurship Center, February 2006-present Professor of Economics, August 2005-present

Entrepreneurship Center Activities Director of the WVU Entrepreneurship Center from October 2002 until February

2006. Currently, serves as Senior Research Advisor to the WVU Entrepreneurship Center,

focusing on the link between entrepreneurial activity and economic freedom.

Professional Activities Research published in the Journal of Political Economy, Journal of Law and

Economics, Economic Inquiry, Journal of Economic Perspectives, Southern Economic Journal, Public Choice, Journal of Business Venturing, National Tax Journal, and Public Budgeting and Finance.

His edited volume on West Virginia policy reform entitled Unleashing Capitalism: Why Prosperity Stops at the West Virginia Border and How to Fix It was named winner of the 2008 Sir Antony Fisher International Memorial Award by the Atlas Economic Research Foundation.

Local Opportunities & Local Opportunities & The Rise of Global The Rise of Global

CapitalismCapitalism

Russell S. Sobel, Ph.D.Russell S. Sobel, Ph.D.

Professor of EconomicsProfessor of EconomicsJames Clark Coffman Distinguished ChairJames Clark Coffman Distinguished Chair

West Virginia UniversityWest Virginia University

What Explains Prosperity?What Explains Prosperity?

Is it Resources? Location? Democracy? Or ……Is it Resources? Location? Democracy? Or ……

Adam Smith’s Question:Adam Smith’s Question:Why Are Some Countries Rich and Others Poor?Why Are Some Countries Rich and Others Poor?

An Inquiry into the Nature and An Inquiry into the Nature and Causes of the Wealth of Causes of the Wealth of Nations (1776)Nations (1776)

Policies and the system of economic organization Policies and the system of economic organization (e.g., capitalism) matter more than things such as (e.g., capitalism) matter more than things such as resources, geography, education, democracy, etc.resources, geography, education, democracy, etc.

Rankings of Reliance on CapitalismRankings of Reliance on Capitalism

Capitalism & Entrepreneurship Capitalism works because it fosters the

decentralized process of entrepreneurship

Economist Israel Kirzner defines Economist Israel Kirzner defines entrepreneurship as the discovery of entrepreneurship as the discovery of previously unnoticed profit opportunitiespreviously unnoticed profit opportunities

Entrepreneurship & Creative Destruction (Joseph Shumpeter)• An economy undergoes continuous change An economy undergoes continuous change

some industries fail, others are bornsome industries fail, others are born• Number of combinations exampleNumber of combinations example

Our HomesOur Homes

Percent of homes with Heating & Air ConditioningPercent of homes with Heating & Air Conditioning19561956 = 6%= 6% 1996 = 81%1996 = 81%

Percent of homes with only one bathroomPercent of homes with only one bathroom19561956 = 71%= 71% 1996 = 9%1996 = 9%

And They are Better: Our ShowersAnd They are Better: Our Showers

Our CarsOur Cars

We now have DVD players, Air We now have DVD players, Air Conditioning, Anti-lock Brakes, Power Conditioning, Anti-lock Brakes, Power windowswindows

Our PhonesOur Phones

Our EntertainmentOur Entertainment

Our ScienceOur Science

Our ComputersOur Computers

MacBook AirMacBook AirLeast expensive-Least expensive-11-inch, 11-inch,

64GB, $999.0064GB, $999.00Most expensive- Most expensive- 13-inch, 13-inch,

256GB, $1,599.00256GB, $1,599.00

Our Video GamesOur Video Games

From Pong to Rock BandFrom Pong to Rock Band

Our MedicineOur Medicine

U.S. Life Expectancy has risen from 48 in 1900 to 76 todayU.S. Life Expectancy has risen from 48 in 1900 to 76 today

Our MusicOur Music

Policies & The Rate of Change The speed at which these innovations take

place is determined by the policy climate• In areas with bad policy things stay the same

for long periods – little progress• In areas with good policy the rate of change is

faster – more rapid progress

Changes in the rankings of global policy/ capitalism – US (falling) vs other countries (rising)

19751975

19801980

19851985

19901990

19951995

20002000

20052005

20082008

A Quick Tour of The A Quick Tour of The WorldWorld

Map of Economic FreedomMap of Economic Freedom

Example 1Example 1

A Country with VERY LOW Economic A Country with VERY LOW Economic FreedomFreedom

Zimbabwe (in Africa)Zimbabwe (in Africa)

Families in Zimbabwe (Africa)Families in Zimbabwe (Africa)

Example 2Example 2

A Country with LOW Economic A Country with LOW Economic FreedomFreedom

Romania (in Europe)Romania (in Europe)

Families in Romania (Europe)Families in Romania (Europe)

Example 3Example 3

A Country with MEDIUM Economic A Country with MEDIUM Economic FreedomFreedom

India (in Asia)India (in Asia)

Families in IndiaFamilies in India

Example 4Example 4

Another Country with Medium Another Country with Medium Economic FreedomEconomic Freedom

Mexico (in North America)Mexico (in North America)

Families in MexicoFamilies in Mexico

Example 5Example 5

A Country with HIGH Economic A Country with HIGH Economic FreedomFreedom

Hong Kong (in Asia)Hong Kong (in Asia)

Families in Hong KongFamilies in Hong Kong

Example 6Example 6

Another Country with HIGH Economic Another Country with HIGH Economic FreedomFreedom

United States (in North America)United States (in North America)

The world is increasingly a dynamic and The world is increasingly a dynamic and diverse placediverse place

The profit opportunities in the global The profit opportunities in the global marketplace are different by country and marketplace are different by country and constantly changingconstantly changing

Locally focused business and wealth Locally focused business and wealth management strategies that worked in the management strategies that worked in the past are insufficient for the futurepast are insufficient for the future

Diversifying Globally U.S. policy changes have been moving

away from capitalism• Crony Capitalism• Unpredictability / Uncertainty

Global Opportunities:• Resource suppliers from foreign countries• Locations in foreign countries• Products for foreign markets• Customers (growing world middle class)• Personal investment portfolio

Food for Thought video

http://www.youtube.com/watch?v=cL9Wu2kWwSY

Thank You / Q&A

Contact Information:

Russell S. Sobel, Ph.D.Coffman Distinguished Chair

Dept. of Economics, WVU

[email protected]

(304) 293-7864

Making and Managing Money in West Virginia

Economy & Finance

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