Simply amazing. A picture (chart) is worth a thousand words.
Simply amazing. A picture (chart) is worth a thousand words.
I remember reading a little over 10 years ago Pat Buchanan’s political and demographic book titled The Death of the West. The book focused heavily on demographic trends in Europe and America, but also touched on Japan’s abysmal situation regarding their rate of reproduction. As it turns out the trend has not changed in the decade that has passed.
Japan, as you can easily see in the charts below, has hit a tipping point. A few years ago, the tip happened in its population growth. The population began shirking because the number of deaths began to outpace the number of births. This shift wasn’t the result of war, famine or disease.
To an investor, why does this matter? This trend matters because, while similar trends may not be as pronounced in the US and many European countries, we all have similar ‘social security’ nets in place to provide assistance to the population during their retirement years. In the case of Japan, if their future workforce is continually shirking compared to the workforce group that they follow, the social security model will become a giant albatross for the entire society and economy.
If this sounds like fear mongering, it isn’t. Take California’s CALSTRS teacher retirement system. Recent projections have the program going broke by 2046. As a result the State of California is likely to move to raise contribution rates by employees and employers over the next 7 years (The amount of money current employees and their employers must pay at each pay period to the CALSTRS coffers.). For employers, it is proposed that rates would go up from 8.25% to over 19% annually over the phase in period. For employees the phased in rate hike would increase their current contribution rate by a little over 2%. This translates into fewer dollars going to educate future generations of workers and fewer dollars in the pockets of current workers to spend in the economic or save. There’s no free lunch here.
Below is Japan’s reality…which isn’t all that far from our trajectory.
A very interesting segment and thought about how new findings and diet trends can impact your investment decisions. This goes back to what I’ve talked about before…If you can understand trends in society, you’re on track to being able to develop successful investment ideas.
If you’d like to read more, check out WSJ’s, “The Questionable Link Between Saturated Fat and Heart Disease.”
A not so random observation…This weekend I was looking at how the S&P 500 has behaved year-over-year based on where the index start at the first trading day of the year. Since 2002, the S&P 500 has always spent part of the year in the red. By this I mean that the price of the index fell at some time during each year below its adjusted close on the first trading day of the year.
The anomaly to the trend noted above is our current year, 2012. So far the index has yet to break into negative territory. It came close during the May-June sell off, but failed to close below where it began on the first trading day of the year. We still have over a month left in the year…I suppose anything can happen.
Master Limited Partnerships (MLP) have sold off heavily since the post-election market decline. The market fears that their favored tax status will be adjusted. Either the high yields that these stocks currently carry will be depressed or investors in such companies will be hit with higher tax rates. That’s the fear. What will the reality be? Who knows. Friday saw a significant amount of buying activity in many MLPs.
Over the past few weeks I’ve read reports from the S.F. Federal Reserve, Credit Suisse, H.S. Dent and Jim Fink that have been echoing a similar story. The story has to do with the coming Baby Boomer demographic shift and its impact on the stock, bond and real estate markets. The outlook is not good, especially for equities. I’m linking below to the report put forth by the S.F. Fed and a link to where you can download the Credit Suisse report.
If you do not have time to read the entire report, I’d highly recommend you at least skim over the report. The visuals are helpful in summarizing and communicating the main observations.
In next month’s edition of TheMarketCapitalist.com newsletter I will be discussing how you may need to adjust your investment strategy in light of the information contained in these and other reports.
The market has been on a great run since December, but I’m sensing investors are becoming more cautious about the longevity of this spurt of stock price appreciation. I say this not from reading articles of authors opining about such matters. It is actually the behavior of a handful of stocks I watch that makes me wonder what’s going on ‘out there’.
What I’m seeing is a trend where the market can be flat or down, while certain stocks actually go up. They’re bucking the trend. Why is this occurring? The first question I would ask is what type of stocks are we talking about? Are they the same type of stocks and, if so, what characteristics do they exhibit? They are all value stocks that pay sizable dividends. The dividends are seen to be very stable or stable and growing. These are stocks that I would use as my more conservative equity bets. In the case of this group of stocks, if the market falls, I still will receive a dividend and ride out the storm knowing that a temporary set back in share price does not mean all is lost.
I’m concerned that the ‘odd’ behavior I’ve seen on multiple occasions is the behavior of a large amount of investors repositioning their portfolios to ride out what they believe is a coming market downturn.
My conclusions might be totally off base, but even if my observation is correct, the behavior of a certain group of investors does not mean they know the future. Yet, the market is driven by the supply and demand of investor money. People can become spooked for correct or incorrect reasons.
If you’re an investor that has seen significant gains since the fall (season), it might be a good time to consider taking a profit. It’s hard to call a market top, but it’s easy to execute a trade and lock in a profit. Don’t be a pig.
In 2010 the world consumed about 88.2 million barrels of oil per day–2.7 million barrels per day more than in 2009. Whether you look at the incremental increase in demand or the percentage gain, oil demand in 2010 increased at the second-fastest pace in 30 years. Much of this rebound stemmed from the snap-back in consumption that followed the severe 2008-09 recession. But the magnitude of this recovery took many analysts and industry participants by surprise.
Investors should also remember that although US oil demand remains well under its 2004-05 high, global oil demand hit a new peak in 2010. Demand growth in 2011 won’t match up with last year’s resurgence. However, the International Energy Agency’s (IEA) forecast still calls for global oil demand to grow by more than 1 million barrels per day to 89.3 million barrels per day. This uptick in consumption hardly qualifies as weak; oil demand has grown at an average annual rate of 1.05 million barrels per day since 1990.
The IEA has raised its estimate of 2011 crude oil demand sharply higher since July 2010. Although the agency has trimmed its projection by about 300,000 barrels per day since August, these estimates remain far higher than they were six months ago…READ MORE.
My Take: The piece linked above provides a great overview of projected oil demand with some industry insights in terms of how investments are likely to react given a run-up in price of a barrel of oil. Elliott Gue is an expert in energy related investments and does a great job explaining some of the industry’s mechanics (investing related) in a way that is accessible to a wide audience.
Roughly half (48%) of Americans now watch video online, compared to 10% for mobile and 97% for traditional TV, according to the latest findings of Nielsen State of the Media Q2 report.
Mobile subscribers watching video on their phone increased approximately 36% since Q2 2010, and watching video on the internet continued to flourish. Interestingly, the new screens do not impact the time spent viewing traditional television, which saw an increase of 2 hours 43 minutes per month…READ MORE.
Note: This Internet and mobile trends noted above have huge investment implications. You are dealing with a massive shift in consumer behavior that will continue to increase in the coming years. One play that comes to mind is Cisco Systems, which I wrote about in October’s edition of TheMarketCapitalist.com newsletter.
There are no double-digit investment returns anywhere in sight for owners of financial assets. Bonds, stocks and real estate are in fact overvalued because of near zero percent interest rates and a developed world growth rate closer to 0 than the 3 – 4% historical norms. There is only a New Normal economy at best and a global recession at worst to look forward to in future years…READ MORE.