2018 Investment Symposium

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Barbara Robertson
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1 2018 Investment Symposium Opening General Session: How Will the Demographic Numbers Affect Your Numbers? Moderator: Jeffrey G. Passmore, FSA, EA, FCA Keynote Speaker: Richard F. Hokenson, Economist SOA Antitrust Disclaimer SOA Presentation Disclaimer

2 Economic and Investment Implications of Global Demographics Richard (Dick) Hokenson

3 Agree/Disagree? Our teeming population is the strongest evidence our numbers are burdensome to the world, which can hardly support us from its natural elements. Our wants grow more and more keen and our complaints more bitter in all mouths, while nature fails in affording us our usual sustenance. In every deed, pestilence and famine and wars have to be regarded as a remedy for nations as the means of pruning the luxuriance of the human race. Tertullian, Treatise of the Soul The most important benefit of population size and growth is the increase it brings to the stock of useful knowledge. Minds matter economically as much as, or more than, hands or mouths. Julian Simon Today we measure progress by measures such as GDP and it s derivative, TFP. These were designed for steel-and-wheat economies. Joel Mokyr 2

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6 The Global Mega-Trends More than 50% of the world is now Urbanized will be 70% by More than 50% of the world s population lives within 200km of a coastline. Of all children born in the developed world today, at least half will celebrate their 100 th Birthday. Nearly half of the world lives in countries with birth rates that are below replacement increased focus on immigration. Probability of Marriage is declining in the East and divorce rates are increasing opposite is occurring in the USA It will still be the Anglo-Saxon Century 5

7 Major Investment Themes Race to Zero Interest Rates Central Banks are pushing on a string Bullish on Productivity Bearish on inflation Lowflation -- revenue recession? Credit spreads should be wide Even stronger surge in M&A Shocks to the system are deflationary (negative demand shocks) Equity analysts also need to pay attention to the balance sheet Shift in consumption from goods towards experiences Multiple generations of retired households 6

8 The Speed of Ageing: Developed Countries 7

9 The Speed of Ageing: Developing Countries 8

2050 Population as a Multiple of 2010 No data 0.7 < 1.0 1.0 < 1.3 1.3 < 1.9 1.9 < 3.

10 2050 Population as a Multiple of 2010 No data 0.7 < < < < 3.4 Source: Population Reference Bureau 2011 World Population Data Sheet; Hokenson & Company. 9

Annual Rate of Change of Urban Population (2005-2010) No data -1.5% - <0.8% 0.8% - <2.1% 2.1% - <3.

11 Annual Rate of Change of Urban Population ( ) No data -1.5% - <0.8% 0.8% - <2.1% 2.1% - <3.5% 3.5% - 6.8% Source: Population Reference Bureau 2011 World Population Data Sheet; Hokenson & Company. 10

12 The Era of Low Interest Rates has only just begun 11

13 U.S. Long-Term Interest Rates Since

14 Nominal Yield on Long-Term Treasuries versus Smoothed Growth in Nominal GDP 13

15 U.S.: Smoothed Growth in Nominal GDP and Labor Force 14

16 U.S.: Smoothed Growth in Nominal GDP and Forecasted Labor Force 15

17 Nominal Yield on Long-Term Treasuries versus Historical and Forecasted Growth in Nominal GDP 16

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19 Changes in the Financial Arrangements of Households

20 Number of Women Not in the Labor Force Millions

21 U.S. Households with more MONEY than TIME 36 Husband Worked - Wife Worked Millions

22 U.S. Households with more TIME than MONEY 16 Husband Worked - Wife Did Not Work Millions

23 Population Trends in the Developed World 22

24 The Developed World Population Change by Age Groups in Millions:

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26 Europe: Working Age Population Annual Change in Millions (LHS) Total in Millions (RHS) 25

27 The American Exception 26

28 Total Fertility Rate for Selected Regions and Countries:

29 Percent of Women Aged Who are Childless by Educational Attainment of Mother 28

30 Family Size of Mothers Aged with an Postgraduate Degree 29

31 Legal Immigration Sources: INS Millions

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33 The US is Winning the Global War for Inventors 32

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35 Are Millennials a Different Generation?

36 Projected Population by Generation 27

37 How Many Millennials Live at Home? 36

38 Millennials Own Cars and Will Become Homeowners (Persons aged by Years of Birth) 37

39 Married or Cohabitating? 38

40 39 Social (In)Security? Social (In)Security?

41 40 United States: Population in Millions (2010)

42 United States: Population in Millions (2050) Male Female Sources: United Nations; Hokenson & Company. 41

43 Developing World with a Focus on BRIC Brazil Russia India China 42

44 43 Russian Federation: Working age Population Annual Change in Millions (LHS) Total in Millions (RHS)

45 China: Working Age Population Annual Change in Millions (LHS) Total in Millions (RHS) 44

46 The Aging Index: China versus the US Ratio Sources: United Nations; Hokenson & Company. USA China 45

47 China: Six Brides for Seven Brothers (Sex Ratio at Birth by Birth Order) Source: China 2000 Census. 1st births 2nd births 3rd births 4th+ births 46

48 India: Working Age Population Annual Change in Millions (LHS) Total in Millions (RHS) 47

49 Brazil: Working Age Population Annual Change in Millions (LHS) Total in Millions (RHS) 48

50 A World Without Work OR A World Without Workers?

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52 World: Working Age Population Annual Change in Millions (LHS) Total in Millions (RHS) 51

53 Suggested Readings and References Simon, Julian The Ultimate Resource Easterlin, Richard - Birth and Fortune: The Impact of Numbers on Personal Welfare Fisher, David Hackett - The Great Wave: Price Revolutions and the Rhythm of History Friedan, Betty The Feminine Mystique Drucker, Peter The Age of Discontinuity Population and Development Review 52

Stocks and Bonds Track Aging Population:

Stocks and Bonds Track Aging Population: 1952-2008 8 85.00% 7 6 5 4 3 2 1 Correlation: 93% Stocks and Bonds as a Percentage of Household Liquid Financial Assets (left scale) Population 35 Years and Over