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If Demographics is Destiny, then America’s Future Sucks
Desperate homeowners counting on a "V" shaped recovery in residential real estate prices to bail them out better first take a close look at global demographic data, which tells us there will be no recovery at all.
I have been using the US Census Bureau's population pyramids as long leading indicators of housing, economic, and financial market trends for the last four decades. They are easy to read, free, and available online at http://www.census.gov/. It turns out that population pyramids are something you can trade, buying the good ones and shorting the bad ones. These graphical tools told me in 1980 that I had to sell any real estate I owned in the US by 2005, or face disaster.
No doubt hedge fund master John Paulson was looking at the same data when he took out a massive short in subprime securities, earning himself a handy $4 billion bonus in 2007. To see what I am talking about, look at the population pyramid for Vietnam. This shows a high birth rate producing ever rising numbers of consumers to buy more products, generating a rising tide of corporate earnings, leading to outsized economic growth without the social service burden of an aged population. This is where you want to own the stocks and currencies.
2) Now look at the world's worst population pyramid, that for Japan. These graphs show that a nearly perfect pyramid drove a miracle stock market during the fifties and sixties which I remember well, when Japan had your textbook high growth emerging market economy. That changed dramatically when the population started to age rapidly during the nineties. The 2007 graph is shouting at you not to go near the Land of the Rising Sun, and the 2050 projection tells you why. By then, a small young population of consumers with a very low birth rate will be supporting the backbreaking burden of a huge population of old age pensioners. Every two wage earners will be supporting one retiree. Think low GDP growth, huge government borrowing, deflation, and a terrible stock and housing markets. If you are wondering why I am aggressively shorting the yen right now, this is a big reason. Dodge the bullet.
3) If Brace yourself. The US is turning into Japan. As a silver tsunami of 80 million baby boomers retires, they will be followed by only 65 million from generation "X". The intractable problems that unhappy Japan is facing will soon arrive at our shores. Boomers, therefore, better not count on the next generation to buy them out of their homes at nice premiums, especially if they are still living in the basement, and not paying any rent. They are looking at best at an "L" shaped recovery, which is a polite way of saying no recovery at all. What are the investment implications of all of this? Get your money out of America and Japan, and pour it into Vietnam, China, India, Brazil, Mongolia and other emerging markets with healthy population pyramids. You want the wind behind your investment sails, not in your face with hurricane category five violence. Use any serious dip to load the boat with the emerging market ETF (EEM).
4) Vietnam is a Paradise for Demographic Investors. Now that we have figured out that Vietnam is a great place to invest, take a look at the Van Eck Groups Vietnam Index Fund (VNM). The venture will invest in companies that get 50% or more of their earnings from that country, with an anticipated 37% exposure in finance, and 19% in energy. This will get you easily tradable exposure in the country where China does its offshoring. Vietnam was one of the top performing stock markets in 2009. It was a real basket case in 2008, when zero growth and a 25% inflation rate took it down 78% from 1,160 to 250. This is definitely your E-ticket ride. Vietnam is a classic emerging market play with a turbocharger. It offers lower labor costs than China, a growing middle class, and has been the target of large scale foreign direct investment. General Electric (GE) recently built a wind turbine factory there. You always want to follow the big, smart money. Its new membership in the World Trade Organization is definitely going to be a help. I still set off metal detectors and my scars itch at night when the weather is turning, thanks to my last encounter with the Vietnamese, so it is with some trepidation that I revisit this enigmatic country. Throw this one into the hopper of ten year long plays you only buy on big dips, and go there on vacation in the meantime. Their green shoots are real. But watch out for the old land mines.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on the “Today’s Radio Show” menu tab on the left on my home page.
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While the OP topic still relies on the vision of an ever increasingly yielding environment, making any conclusion fragile, its biggest value was to unearth who thinks what among the crowd of the US demise is for soon.
Do Chinese or perhaps Koreans assimilate better than Latinos? They certainly value education more than Latinos & can afford better schools b/c they have less children. IMO, level of assimilation may be less important.
'Latinos' is a loaded word (as it includes virtually all groups). Regarding the U.S. experience, and ignoring Spainish hispanics and focusing on central American indians (i.e., what many would call 'Mexicans', as well as many Mexicans would call Mexicans), yes Chinese and Koreans have assimilated more (of course, less so than the Spanish). Also, it is important to note that with Mexicans today we have the claim that a large part of the U.S., if not all of it, belongs to them (even though there were effectively no central American indians living in American territory until the last few decades). Essentially, we are allowing ourselves to be invaded while allowing a myth to be perpetuated to justify potential future war over U.S. territory. So it's not just a lack of assimilation that is problematic, costly (i.e., in economic terms, noneconomic trems, and even lives), but also the increased likelihood of internal war due to something that was easy to see coming. As for other 'Latinos', it would depend on how Spanish vs. how central American indian or south American indian they are.
I would recommend reading, for example, Generations of Exclusion: Mexican Americans, Assimilation, and Race. The writers based their analytic parts on data from around 1965 and and compare it across time. They went into the project assuming and wanting to believe that Mexicans assimilated like say Italians, for example, but concluded that essentially they did not. In fact, there was an initial trend toward assimilation some forty or fifty years ago, but after one or two generations the trend was away from assimilation (i.e., even by their very cultural Marxist interpretations).
dupe
I do not think demographics is destiny. I think politics is destiny.
That is silly, and mostly backward. Demographics can largley determine politics (e.g., about 95% of American blacks voting for Barry Soetoro).
Agreed, but Demographics,is a VERY strong indicator of Politics,,,,,,,,,
Just look at Election 2008................
Don't forget the Amnesty Programs, that will allow unfettered immigration..............
Only Americans of European descent are blowing in the wind.
Well, the Romans imported cheap labor to do the work that Romans wouldn't do, and look where it got them.
If memory serves, it was the same issue we have here, MATERIALISM, and Mores/Values, led to an aging population.
That in turn led to hiring Merc's to do what they used to do, breed their own warriors,...........So, by greying out the REAL Romans, the Merc's took over.
worked for about 500 years.
In the US pyramid, the 15-30 age group is as large as the baby boom generation. How does that support a demographic-based decline? It suggests to me 3 decades of growth.
Unless, of course, the Boomers, who are living longer and who by and large have little to no retirement savings other than their underwater houses, will self-indulgently cling to their jobs and keep the following generations living in their parent's basements for an extra ten years or so.
For some reason I'm not seeing where the third spawn of the narcissistic beast is going to change the nature of said beast. We are the bloated, over the hill rock god who keeps waking up in a pool of his own vomit ad nauseum. Eventually we're going to choke on that vomit and die and disgusting and shameful death.
it's hard to believe madhedge actually believes what he wrote. sure, the lower the birthrate is below replacement level, the greater the burden of elderly care on the economy, but also the more investment in each kid, and so the more skilled of a labor force. likewise, the higher the birthrate is above replacement level, the less the burden of elderly care, but also the less investment in each kid, and the less skilled of a labor force. so societies with low birth rates tend to gain affluence more quickly than societies with high birth rates, and very high birth rates are strongly associated with poverty and political instability.
The most important issue of demographics is that we have so many built-in ponzi schemes in government and pensions that it is indeed a disaster when demographics cannot support them anymore.
In real estate, too many houses were built and too many people bought investment properties (which fueled the building). That in addition to demographics contributed to the bust. We're at the point now where bulldozing houses might be the only way to save property values. But that's just plain stupidity because destroying property is destroying real wealth.
I would look at aggregate productivity trending and employment participation trending as being a better indicator of the quality of an emerging market than simple demographics. A younger population doesn't do much for you if they're stupid and lazy.
Bingo, although measuring real productivity is a challenge these days.
Bingo.
...and for those of us whom don't believe in the [irrational] Third World lovefest? While I'm not believing in a "V", I would believe it's more of a "U".
No thank you, but I'm not going to be supporting their governments with my money. Especially ones that are quite despotic and/or base themselves off of jobs offshored from other countries.
The only thing I'd want to see with Vietnam is the finishing of the job that was left off in the 1970's. Not another job offshoring destination, w/ manufacturers of junk run by thugs not interested in progress.
Sethstorm:
You have to understand that for many of the politically correct persuasion there just must always be a great non-American/non-white hope. Remember Japan (in the 1980s and even early 1990s), the 'Asian Tigers' (in the 1990s up to the Asian crisis), Latin America in the 1970s up to around the first 'debt crisis', China now, etc.). You can tell by their unbridled, non-critical, enthusiasm for whatever hellhole we are suppose to be more like.
In addition, it's more of the hope side of the investment world (call them 'trader'/broker wannabes). For them they must keep alive the belief that there is a liquid market out there that will do well. They ignore the fact that when, for example, the U.S. market crashes all the big tend to (i.e., correlations trend toward one). Also, in fact, human history almost never progresses in a straight line and sometimes there are precious few places to hide (forget about large countries), and now we seem to be taking some steps backward (not just the U.S.), and the again some are just looking for the politically correct silver lining ("yeah the U.S. is screwed but not, you know, you know, XXXXX"). I'm with you, screw them, they can invest all their capital in and move to the Vietnamese, Chinese, or whatever paradise they think has unlimited potential.
Sounds like the author fails to realize the US can and will import citizens. No shortage of people looking to come here, especially now that they will get free health care. What a selling point!
And judging by recent expatriate studies, no shortage of people wanting to leave the medieval US of A!
-Sounds like a great time for the US to be enacting vast new entitlement programs, throwing open the border and spending money we don't have.
-Most of the Middle East is a "demographic paradise" too...Sold to you!
read my reply to an earlier thread. the middle eaast is not a total basket case. there are countries there that are investing in educating their young, male and female even in adverse conditions. You will be surprised at what you find there as indeed in the rest of Asia.
Nothing would make me happier but I just don't see it happening....with the possible exception of Iran, a country with a fairly well educated and pro-American youth. Had the US pressed for regime change there instead of Iraq there could have been some real momentum for improvement by now.
We should start breeding camps!
Also we should pass a law where woman can't say no anymore! EVER! :)
Who the F is the almighty "we"? The male-centric addressing the male-centric male reader and male (only) voter pre 1918?
yous goina get high blood pressure s. best take a trip to SE Asia for a nice new experience get away from the damnable West. stay for a few years. Brazil too. you could alternate.
Reductio - "The physical environs of the Japanese islands are irrelevant;" You need to take a look at 'Guns Germs and Steel'. Geography is destiny is the theme of the book.
China's fertile coastal plains, easy to traverse and administer, led to a large, stable, state. Europe, by contrast is broken up by high mountains, peninsulas and islands, making the conquest of the whole place difficult, meaning enemies get to fight another day, meaning warfare evolves.
So in your thought experiment, given time, the Mexicans would evolve into a culture determined by the Japanese terrain.
In fact it could be easier than you think as they already eat ceveche, a raw fish dish.
It is relatively trivial to conduct a systematic refutation of GG&S, and I have done so elsewhere years ago in arguments around the same topic.
Several fundamental assumptions or postulates in GG&S were false and refuted by archaeological evidence discovered after the publication of the book.
GG&S was an attempt to bend the truth around a particular hypothesis.
Accounding to the premise, there should have been a mighty empire on the plains of America, but it didn't happen. Yet the Incas, who would be of the same genetic background as the plains indians, created an advanced civilization in dense jungle and rocky mountain tops. What were the Vikings secret of success? Certainly not conducive growing climates. Guns? The chinese had gunpowder hundreds of years before the Euros, and paper. Steel? Middle east invention. And how did the Easter Island monuments come into being? Certainly not many resource benfits there. And a topic of this article, the Japanese powerhouse(posthumous), has no basis to have existed beyond the level of the SE Asia islands that the good Dr based his theory on. Its just another example of cherry picking anecdotal evidence to manufacture credibility.
GGS is just another attempt to explain away elitist guilt by developing an unsupportable theory. Geography can limit options, and resources are important, but are of no use without motivation, insight, and hard work. Mankind has always been the hairless ape, with no special speed, long fangs, or sharp claws. It has been our mental traits that have been the deciding factor. People accept that when comparing ourselves to the three toed sloth, but PC correctness will not even accept the possiblity when comparing cultures.
Throughout history, many cultures have created successful models. And anyone willing to copy the model and assimilate into it will have a good chance of success too. Current PC globalist thinking cannot allow that, so instead, are pursuing policies to destroy our current model by needlessly, purposely, overwhelming it. This is wrong. Not only does it destroy something unique, it wastes resources, and it exploits and harms the people they are playing as pawns in their games.
"What were the Vikings secret of success?"
Raping, pillaging, killing, thievery and well-designed and built fast, small ships.
But lack of morals and ethics will only get you so far......
The Vikings also benefited from poor structural defenses which allowed the raids.
Due to the roman empire which set part of its supply in the Mediterranean world (south Europe, North Africa and Middle East), resources were allocated to defend there. When a shift towards the North was forced due to these supply lines being challenged, Vikings traders observed that the northen coastlines to be poorly defended.
Fast ships were not enough.
Robobbob: I agree. I think destruction of the country and a certain group of people was and is the intent. Of course, it has and is being helped along by plenty of useful idiots that are desparate to hear or read that all is fine and we are all the same (although some are more equal than others) or else they will be called nativist, racist, Nazi, all of the above. Furthermore, I think you are correct to bring in the moral argument that it is inherently wrong to destroy the culture that laid the golden egg as it were.
Ignoring the Spanish/Caucasian element, Mexicans (central American indians) are in fact descended from Mongoloids, yet they are very different than Japanese, Chinese, etc. 'Genetic drift' is an element that doesn't guarantee any kind of convergence. If you wipe out the Japanese tha is most likely about it for the Japanese.
Guns, Germs, and Steel was written by someone who had a politically correct theory and tried, unsuccessfully, to develope a theory around it.
+1000 -- exactly so!!!!
Real science is the only science.
Predation and predatory capitalism will temporarily trump various tribes, but eventually it eats itself, and unfortunately we are now witnessing the self feast!
Guns, Germs, and Steel is not bad if you recognize the elephant it is running around and pretending not to see all the time, and that's intelligence or IQ.
With that in mind, if you connect a few more dots and fill the blanks, it's a pretty good book.
+1
The key is per capita real income, not aggegate poverty with aggregate growth. It is silly and delusional to focus on the gross number when per capita are the critical values (e.g., per capita real income).
gross national product and gross national income are as important as per capita income as the gross figures give a country the negotiating power. Norway has one of the highest per capita incomes in the world. How much influence do you think they have on world trade or even in general world affairs?
The importance of culture in success (as measured by Western standards, naturellment) is illustrated by comparing the economy of Isreal to its resource rich arab neighbors/enemies. Respect for the individual and education (a Jewish concept), rule of law, freedom of press and information and especially, the liberation of women is the key to economic prospersity. Thus, Islamic cultures are doomed. They want the bomb but hate the scientific method in back of it. So, their favorable demographics will not save them from their religious fanatics. The same applies to the other countries mentioned. China's one child policy also will doom them demographically. Demographics is a poor approach to predicting future productivity otherwise Africa, Haiti and Bangladesh would be the juggernauts of the future
Ashkenazis have the highest average IQ of any measured ethnic subgroup.
This is why Israel is prosperous while neighbors are not.
The neighboring nations lack the population necessary to support the "scientific method."
The Arabs who are intelligent enough to understand science all left arabia and sought out like-minded people just as surely as cliques form in schools across this nation along IQ lines. Culture is created by PEOPLE, not the converse.
You're referring to studies which were CONDUCTED in the USA.
Globally speaking, the Inuit score the highest in culture-free IQ test.
Get your facts straight, dood!
If you are indeed referring to Israel, and not some fictitious country that has a similar spelling, then you are so far off I hesitate to even bother. Roughly 11% of Israel's GDP is due to subsidized loan guarantees and outright aid by the US. Not to mention that the US is it's largest trading partner, ergo Israel's largest manufactured export is weapons. In case you haven't been paying attention the US's economy isn't looking so bright. The sunsetting in the west cast's a long shadow over the little star in the middle east.
"Demographics is a poor approach to predicting future productivity otherwise Africa, Haiti and Bangladesh would be the juggernauts of the future"
And this statement is confirmed how? That is to say, outside of backtesting demographic data as a basis for economic prognostications, how can one validate such a claim? If we're asserting that China IS the juggernaut of the future (temporal contradictions aside), what would Haiti, etc. have to do to become juggernauts in their own rights? Demography is certainly a factor when making economic projections, as the quantitative aspects of a nation's population have a great deal of bearing on economic outcomes; that is not to say that the qualitative aspects (let's say culture) don't compound the problems or potential presented by a particular demographic scenario. Just my 2-cents, and I agree with some of your points, although I don't share your view of the future of Islamic cultures. Christian dogma strongly opposed scientific advancement, yet Europe experienced a Renaissance and a nation of religious fundamentalists escaping persecution went to the moon 200 years subsequent to their emancipation. To assert that one of the youngest faiths on the planet is incapable of revolutionary progress with respect to the sciences and general suffrage seems to be a bit of a stretch.
It's the Ashkenazi Jews that are the difference between Israel being economically more like the people around them, not some 'cultural' artifact. For Christ sakes, what do you think is one of the reason they are extending and fortifying fences around Israel now? It's not because they think they can assimilate them, it's because they know they cannot, and they aren't making a huge supply of 110+ I.Q. folks these days.
Furthermore, China's only hope to increase real per capita income was probably to reduce its population (one can argue with their method of course). You say, "demographics is a poor approach to predicting future productivity otherwise Africa, Haiti and Bangladesh would be the juggernauts of the future." True about the future of those countries, but that is largely because of demographics. Remember, demographics isn't just about the politically correct part we are permitted to talk about in polite company (i.e., age differences), no it's much more and is quit predictive in the long run, in fact, in that context: "demographics is destiny."
The total world IQ is constant, but the population is increasing, thus...
Virtually nothing human related is constant, not the population, and not average IQ.