Demographics School

65
Demographics School presented by Rodney Johnson & Harry S. Dent Jr. Dent Research

description

Demographics School. presented by Rodney Johnson & Harry S. Dent Jr. Dent Research. HS Dent. Independent Economic Research Company Forecast economic change based on three key tools: 1. Demographics and demographic trends 2. Predictable consumer spending patterns, and - PowerPoint PPT Presentation

Transcript of Demographics School

Page 1: Demographics  School

Demographics School

presented by

Rodney Johnson & Harry S. Dent Jr.

Dent Research

Page 2: Demographics  School

HS Dent

Independent Economic Research Company

Forecast economic change based on three key tools:

1. Demographics and demographic trends2. Predictable consumer spending patterns,

and3. Technological innovation acceptance rates

Page 3: Demographics  School

Demographics

Page 4: Demographics  School

Strong Uptrends and Downtrendsin BirthsUptrends Downtrends

Bob Hope Generation 1909-1914 1917-19191920-1921 1924-1933

Baby Boomers 1937-1943 1944-19451946-1947 1948-1950

1951-1957/61 1962-19681969-1970 1971-1973/76

Echo Baby Boomers 1977-1990 1991-19961997-2007 2008-

Page 5: Demographics  School

Average Immigrants per Year by Age 1945-2000

Source: US Census Bureau

Page 6: Demographics  School

The Immigration Adjusted Birth Index

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

5,500,000

1909 1929 1949 1969 1989 2009

Imm

igra

tion

Adj

uste

d B

irths

Source: Dent Research

Page 7: Demographics  School

How many people born in each year

The numerical effect of immigration

Composition of US population by age groups

Where the information comes from (NCHS, Census)

Websites of interest: www.cdc.gov/nchs/ www.census.gov

Demographics

Page 8: Demographics  School

Predictable Spending Patterns

Page 9: Demographics  School

Average Annual Family Spending by Age (5-year age groups)

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000 46-50

Spe

ndin

g

Age

Page 10: Demographics  School

18-22

Single

22-30

Young

Married

31-42

Young

Family

46-50

Family,

College

Kids

50+

Empty

Nesters60+

Retired

Change in Spending at each Age & Stage of Life

Page 11: Demographics  School

Boomers Are Not Different!

Front end of Boomer generation began retiring in 2003

Wave continues through 2025

Spending STILL PEAKS approx. age 48-50

Page 12: Demographics  School

Education (college, trade school, etc.)WorkforceApartmentsMarriageChildrenHome purchaseSecond home purchaseChildren leavePay down debtsSave for retirementVacation propertyRetirement property

The Adult Life Cycle

Page 13: Demographics  School

Only Works for Some

Economies must be IndustrializedModernizedDemocratized in terms of

consumers holding funds

Page 14: Demographics  School

71.0%

13.1%

19.2%

-3.4% Personal Consumption Expenditures

Gross Private Domes-tic Investment

Government Consump-tion Expenditures

Net Exports

Source: U.S. Department of Commerce, Bureau of Economic Analysis, 2013

Who Spends What in the Economy2012

Page 15: Demographics  School

-10%0%

10%20%30%40%50%60%70%80%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Personal Consumption Expenditures Gross Private Domestic InvestmentGovernment Consumption Expenditures Net Exports

Data Source: Bureau of Economic Analysis, 2013

Who Spends What in the Economy, 2002-2012

Page 16: Demographics  School

Composition of U.S. Gross Domestic Product, 1929-2012

1929

1930

1931

1932

1933

1934

1935

1936

1937

1938

1939

1940

1941

1942

1943

1944

1945

1946

1947

1948

1949

1950

1951

1952

1953

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Government consumption expendituresNet exports of goods and servicesGross private domestic investmentPersonal consumption expenditures

Source: Bureau of Economic Analysis

Page 17: Demographics  School

69.9%

13.1%

20.3%

-3.4% Personal Consumption Expenditures less Transfer Payments

Gross Private Domes-tic Investment

Government Consump-tion Expenditures with Transfer Payments

Net Exports

Source: U.S. Department of Commerce, Bureau of Economic Analysis, 2013

Who Spends What in the Economy2012

Page 18: Demographics  School

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Personal Consumption Expenditures Gross Private Domestic InvestmentGovernment Consumption Expenditures Net Exports

Share of GDP, Accounting for Government Social Programs and Financial Recoveries

Data Source: Bureau of Economic Analysis, HS Dent Research, 2013

Page 19: Demographics  School

Percent of Personal Income Contributed by Government Programs

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Source: BEA, HS Dent Research, 2013

Page 20: Demographics  School

Total Government Transfer Payments 2000-2012

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$2,200

$2,400

Data Source: Bureau of Economic Analysis, 2013

In B

illio

ns

Page 21: Demographics  School

Americans on Food Stamps2006-2012

2006 2007 2008 2009 2010 2011 201225

30

35

40

45

50Millions of Americans on SNAP

Data Source: USDA, 2013

Page 22: Demographics  School

Americans on Disability

2006 2007 2008 2009 2010 2011 2012 20136.0

6.5

7.0

7.5

8.0

8.5

9.0Millions of Americans on Disability Insurance

Data Source: SSA, 2013

Page 23: Demographics  School

1995

1995

1996

1997

1998

1998

1999

2000

2001

2001

2002

2003

2004

2004

2005

2006

2007

2007

2008

2009

2010

2010

2011

2012

$5,500

$6,000

$6,500

$7,000

$7,500

$8,000

$8,500

$9,000

$9,500

$10,000

$10,500

Data Source: Bureau of Economic Analysis, 2013

Real Personal Consumption Expenditures 1995-2012

Bill

ions

of C

hain

ed 2

005

Dol

lars

Page 24: Demographics  School

1995

1995

1996

1997

1998

1998

1999

2000

2001

2001

2002

2003

2004

2004

2005

2006

2007

2007

2008

2009

2010

2010

2011

2012

$5,500

$6,000

$6,500

$7,000

$7,500

$8,000

$8,500

$9,000

$9,500

$10,000

$10,500

Data Source: Bureau of Economic Analysis, 2013

Bill

ions

of C

hain

ed 2

005

Dol

lars

Missing Growth

Real Personal Consumption Expenditures 1995-2012

Page 25: Demographics  School

Composition of U.S. Personal Consumption Expenditures

1929

1930

1931

1932

1933

1934

1935

1936

1937

1938

1939

1940

1941

1942

1943

1944

1945

1946

1947

1948

1949

1950

1951

1952

1953

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Services

Nondurable goods

Durable goods

Data Source: Bureau of Economic Analysis, 2013

Page 26: Demographics  School

This Is What You See

Page 27: Demographics  School

Potato Chip Purchases by Age

0

10

20

30

40

50

60

70

10 20 30 40 50 60 70 80Age of Head of Household

$ P

er Y

ear

42

Page 28: Demographics  School

Motorcycle Sales by Age

0

10

20

30

40

50

20 25 30 35 40 45 50 55 60 65 70

Age of Head of Household

$ P

er Y

ear

45-49

Page 29: Demographics  School

1954195419541954195719571957195719581958195819581959195919591959196019601960196019611961196119611962196219621962196319631963196319641964196419641964196419641964196419641964196419671967196719671968196819681968196919691969196919701970197019701971197119711971197219721972197219731973197319731974197419741974197419741974197419741974197619761977197719771977197819781978197819791979197919791980198019801980198119811981198119821982198219821983198319831983198419841984198419841984198419841984198419841986198719871987198719881988198819881989198919891989199019901990199019911991199119911992199219921992199319931993199319941994199419941994199419941994199419941994199619971997199719971998199819981998199919991999199920002000200020002001200120012001200220022002200220032003200320032004200420042004200520052005200520062006200620062007200720072007200820082008200820092009200920092010201020102010201120112011201120122012201220122013201320132013201420142014201420142014201420142014201420142016201720172017201720182018201820182019201920192019202020202020202020212021202120212022202220222022202320232023202320242024202420242024202420242024202420242024202620272027202720272028202820282028202920292029202920302030203020302031203120312031203220322032203220332033203320332034203420342034203420342034203420342034203420362037203720372037203820382038203820392039203920392040204020402040204120412041204120422042204220422043204320432043204420442044204420442044204420442044204420442046204720472047204720482048204820482049204920492049205020502050205020512051205120512052205220522052205320532053205320542054205420542054205420542054205420542056205620572057205720572,200,000

2,700,000

3,200,000

3,700,000

4,200,000

4,700,000

5,200,000

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Immigration-adjusted Births

Lagged 45 Years for Peak

Spending

Harley Davidson

Annual Units Sold

The Harley Wave

Data Source: HS Dent Research, U.S. Census Bureau, Bloomberg, Harley Davidson, 2013

Page 30: Demographics  School

Harley Davidson, Units Sold1986-2012

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Data Source: Harley Davidson, Hog Fact book, 2013

Page 31: Demographics  School

Harley’s Biggest Problem

“Harley Davidson’s Aging Biker Problem”Fortune, 9-17-10, Alex Taylor

“…it is struggling against a foe that not even cost-cutting nor brand loyalty can overcome: demographics. Its current owners are getting old, and not enough younger ones are coming up behind them.”

Page 32: Demographics  School

Harley Davidson Share Price1987-2013

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

$0

$10

$20

$30

$40

$50

$60

$70

$80

Data Source: Yahoo! Finance, 2013

Page 33: Demographics  School

Personal Care Services For Females, Including Haircuts

Source: Consumer Expenditure Survey

Page 34: Demographics  School

Source: Consumer Expenditure Survey

Spending on Drugs

Page 35: Demographics  School

Source: Consumer Expenditure Survey

Electricity

Page 36: Demographics  School

Fast Food for Lunch

Source: Consumer Expenditure Survey

Page 37: Demographics  School

The Immigration Adjusted Birth Index

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

5,500,000

1909 1929 1949 1969 1989 2009

Imm

igra

tion

Adj

uste

d B

irths

Source: Dent Research

Page 38: Demographics  School

The Spending WaveBirths Lagged for Peak Spending

195619631971197919871994200220102018202520332041204920561,000

10,000

100,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

5,500,000

Data Source: HS Dent Research, U.S. Census Bureau, Bloomberg, 2013

Dow Adjusted for Inflation, Log

Scale

Immigration-adjusted Births

Lagged for Peak Spending

30,000

Page 39: Demographics  School

The Spending WaveBirths Lagged for Peak Spending

195619631971197819861993200120082016202320312038204620531,000

4,000

7,000

10,000

13,000

16,000

2,200,000

2,700,000

3,200,000

3,700,000

4,200,000

4,700,000

5,200,000

Data Source: HS Dent Research, U.S. Census Bureau, Bloomberg, 2013

Dow Adjusted for

InflationImmigration-

adjusted Births Lagged for

Peak Spending

Page 40: Demographics  School

Age & Stage of Life Determine Spending Patterns

As we move through predictable stages of life, which correspond with different ages, we change our spending in very predictable ways.

What we buy at each stage is predictable and consistent.

This information can be used to forecast how spending will change in the years and decades to come.

Website of interest: www.bls.gov/cex/

Page 41: Demographics  School

Daily Consumer Spending2008-2013

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

$50

$60

$70

$80

$90

$100

$110

$120 Daily Consumer Spending (14-day rolling average)

Data Source: Gallup.com, 2013

Page 42: Demographics  School

Past Forecasts

“For the 1990s and Early 2000s – Our Greatest Boom: Dow Rises to 10,000.”

Our Power to Predict, back cover (1989)

“After those enormous deficits into 1992, the government will likely be in a balanced budget or surplus by 1998-2000.”

The Great Boom Ahead, pg 62 (1994)

“The next great depression will be from 2008-2023.”The Great Boom Ahead, pg 16 (1994)

"No amount of government stimulus will prevent it…" The Great Boom Ahead, pg 35 (1994)

Page 43: Demographics  School

Contrary to popular belief, Americans really can pass The Marshmallow Test

Page 44: Demographics  School

We’ve Seen This Movie Before, Just Look To

The East

Page 45: Demographics  School

Japan Birth Index47-Year Birth Lag

Birt

hs (m

illio

ns)

2.80

2.60

2.40

2.29

2.00

1.80

1.60

1.40

1.20

1.00 1930 1940 1950 1960 1970 1980 1990 2000 1900 1910 1920 1977 1987 1997 2007 2017 2027 2037 2047 1947 1957 1967 47-Year

Birth Lag

Page 46: Demographics  School

Japanese Nikkei IndexJan 1984 – Jan 1990

Page 47: Demographics  School

Japanese Stock Market vs. Change in Consumer Spending 1987 – March 2013

1987 1991 1995 1999 2003 2007 2011-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

Data Source: Japanese Family Income and Expenditure Survey; Yahoo Finance, 2013

Nikkei Average

Change in Consumer Spending

Page 48: Demographics  School

The Rise of Non-Regular Workers in Japan

Source: Ministry of Internal Affairs and Communications (2007), Employment Status Survey, 2012

Per

cent

age

of N

on-R

egul

ar E

mpl

oyee

s

Page 49: Demographics  School

Percentage of Workers Earning Less Than $20,000, by Category

Source: Ministry of Internal Affairs and Communications (2007), Employment Status Survey, 2012

Only 1% Earn More Than $30,000

Less Than 2% Earn More Than $30,000

Over 67% Earn More Than $30,000

Page 50: Demographics  School

Percentage of Workers Earning Less Than $20,000, by Category

Source: Ministry of Internal Affairs and Communications (2007), Employment Status Survey, 2012

Page 51: Demographics  School

Inflation/Disinflation/Deflation

Page 52: Demographics  School

Quantity of Money Formula for Inflation

MV=PYM=Money Supply P=General Price Level

V=Velocity Y=Real Income

Page 53: Demographics  School

-0.50%0.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%

Apr-5

3Ap

r-55

Apr-5

7Ap

r-59

Apr-6

1Ap

r-63

Apr-6

5Ap

r-67

Apr-6

9Ap

r-71

Apr-7

3Ap

r-75

Apr-7

7Ap

r-79

Apr-8

1Ap

r-83

Apr-8

5Ap

r-87

Apr-8

9Ap

r-91

Apr-9

3Ap

r-95

Apr-9

7Ap

r-99

Apr-0

1Ap

r-03

Apr-0

5Ap

r-07

Apr-0

9Ap

r-11

Apr-1

3

-6.00%

-1.00%

4.00%

9.00%

14.00%

Inflation Indicator

Data Source: Bureau of Labor Statistics, HS Dent, 2012

LABOR FORCE GROWTH2.5-YR LAG INFLATION (CPI)

Page 54: Demographics  School

Source: U.S. Census Bureau and U.S. Bureau of Labor and Statistics

1950

1954

1958

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

2002

2006

2010

2014

2018

2022

2026

2030

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

-14-12-10-8-6-4-2024681012141618

20 Year-Oldson a 3-Year Lag

Minus 63 Year-Olds

Inflation

Inflation ForecastA

nnua

l Lab

or F

orce

Gro

wth

Ann

ual I

nfla

tion

(%)

Page 55: Demographics  School

Inflation

Inflation, in a stable financial system, is based on people and workforce growth

Changes in labor force can be used to forecast inflationary pressures

Tremendous changes are coming

Page 56: Demographics  School

Inflation Fears Are MisguidedIt’s DEFLATION That Will Hurt!

With the US government doubling the asset base at the Federal Reserve and pumping trillions of dollars into the economy, everyone is worried about inflation – too many dollars chasing too few goods.

It’s understandable, but wrong. If the economy remained constant, this would make sense. But we are changing, and the changes will eventually mean deflation, not inflation. Unfortunately, deflation hurts a lot more!

Page 57: Demographics  School

The Value of “M” Is the Size of the Money Supply

Printing press – the US Government creates out of thin air

Lending – banks and other institutions create out of thin air through fractional reserve, short borrowing versus long lending

Page 58: Demographics  School

Lending Dollars Into Existence(fractional reserve)

Banks are required to hold a percentage of deposits (a fraction), they lend out the rest. If they do not lend, they do not collect interest and cannot pay their depositors.

If a deposit is made for $1,000, the bank can lend $900, thereby “creating” $900 out of thin air. But the other side of the journal entry of the loan to the borrower, is the note that the borrower owes back to the bank.

Page 59: Demographics  School

Money “Creation” Works Both Ways

The contraction of money is already happening, just not at the Fed.

When any debtor either pays back a loan created through fractional reserve, or has a loan canceled (foreclosure, modification, etc.) then money supply has been contracted.

Page 60: Demographics  School

Government$14Trn

Financial$17Trn

Corporate$11Trn

Consumer$14TrnTotal:$56 Trn !

Source: Federal Reserve Flow of Funds Report

Total U.S. Debt - 2008

Page 61: Demographics  School

1977 1985 1993 2001 20090

10,000,000,000,000

20,000,000,000,000

30,000,000,000,000

40,000,000,000,000

50,000,000,000,000

60,000,000,000,000Federal Govt Trust FundsFederal GovtState and Local GovtFinancial SectorForeignCorporateConsumer CreditHome Mortgage

Government$19.4Trn

Financial$13.8Trn

Corporate$12.7TrnConsumer$12.2Trn

Total:$60.4 Trn

Data Source: Federal Reserve Flow of Funds Report, Treasury Direct, 2013

Total U.S. Debt Outstanding1977-2012

Foreign$2.3Trn

Page 62: Demographics  School

Change in Debt Outstanding 2000 - 2012

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

($2000)($1500)

($1000)($500)

$0 $500

$1000

$1500 $2000 $2500

Financial Sector Mortgages FederalState and Local Corporate Consumer

Data Source: Federal Reserve Flow of Funds Report, 2013

Page 63: Demographics  School

Growth of Consumer Credit2006-2012

06:Q

106

:Q2

06:Q

306

:Q4

07:Q

107

:Q2

07:Q

307

:Q4

08:Q

108

:Q2

08:Q

308

:Q4

09:Q

109

:Q2

09:Q

309

:Q4

10:Q

110

:Q2

10:Q

310

:Q4

11:Q

111

:Q2

11:Q

311

:Q4

12:Q

112

:Q2

12:Q

312

:Q480

100

120

140

160

180

200

220

Auto Loan Credit Card Student Loan

Data Source: NY Federal Reserve Quarterly Consumer Credit Report, 2013

Inde

x 10

0= 2

006

Page 64: Demographics  School

Consumer Credit less Mortgage and Home Equity, 2003-2012

03:Q

103

:Q3

04:Q

104

:Q3

05:Q

105

:Q3

06:Q

106

:Q3

07:Q

107

:Q3

08:Q

108

:Q3

09:Q

109

:Q3

10:Q

110

:Q3

11:Q

111

:Q3

12:Q

112

:Q32.0

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.8Consumer Credit less Mortgage and HELOC

In T

rillio

ns

Data Source: NY Federal Reserve Quarterly Consumer Credit Report, 2013

Page 65: Demographics  School

The Fed Is Pouring Money In

While Borrowers and Lenders are Leaking Money Out

Amount of Money in the Economy

The Money Supply Fight