Best Place to Invest Money Now? Blankfein Speaks

Think what you like about Wall Street (and its sometimes-obscure motivations), you’d be very lucky to buttonhole one of its brightest minds even for a few moments and ask the question of which bankers must surely tire: “Where is the best place to invest money now?”

Well, today is your lucky day, because one of the better-known faces on the Street recently shared a startling insight, and he even backed it up with a well-considered thesis.

Greek banks? Japanese steel? Exotic bonds from distant shores?

Nope. Buy USA, says Lloyd Blankfein, CEO and Chairman of Goldman Sachs.

His reasoning is pretty pedestrian, even a little boring. Blankfein wrote up a full argument recently for the web site Politico. Here’s the nut of his case for America as the best place to invest money now:

The U.S. has a number of major competitive advantages that we sometimes overlook — especially given the focus of the 24-hour news cycle on sensational, and mostly deflating, events. First, the U.S. has favorable demographics — thanks to its relatively high birth rates and immigration. While the BRIC countries — Brazil, Russia, India and China — have generated extraordinary economic growth, the U.S. remains a magnet for many of the smartest, most ambitious people in the world.

Blankfein continued, citing the domestic energy boom, green tech, and the quick response by U.S. policymakers to the unfolding credit crisis. U.S. companies made the right moves, too, he argues, putting them in a better position than you might guess.

He goes on to make some specific warnings about our debt problem and to suggest that immigration policy is central to our advance. But his larger point — don’t give up on America quite yet — is well taken.

There’s a lot of received wisdom out there that the aging of the Baby Boomers means that the ultimate decline of the country is baked in. As the Me Generation fades, the thinking goes, the country will sink into global irrelevance.

Yet U.N. figures suggest that the population of the United States will, in fact, increase over the coming years. It will grow to 478 million by the turn of the next century, far behind India and China (and even, surprisingly, Nigeria), but by no means are things headed into reverse.

As economists are keen to point out, a growing population is a growing economy. With U.S. blue chips, you tend to get the best of both worlds — straightforward accounting practices, rule of law, and experienced management, along with foreign growth from global sales.

Best place to invest money now, multiple-choice version

So, is buying USA the answer? Not by a long shot. You need a diversified portfolio, and no collection of glittering Dow names will get you true diversification right out of the box.

But Blankfein is absolutely right about investing at home. And he’s absolutely right about another thing, even if it’s unspoken on his part: You likely aren’t going to buy the right investment at the right time and in the right proportions.

In fact, most investors are like Ben Graham’s moody Mr. Market, always panicking in and out of investments at the worst possible moment. While we’d all like round-the-clock handholding from a talent as large as that of Mr. Blankfein, the research shows that we’re fundamentally better off letting the traders fight it out. You can do perfectly well with a market return, minus the unnecessary risk, using passive index funds and ETFs.