War Room - December 2012

1. War Room 06 Dec 2012
Demographics – They are a changin’

2. War Room
•Monthly macro discussion
•Using tools in context
•Update on HiddenLevers Features
•Your feedback welcome

3. Demographics – They are a changin’
I. Demographics – Where are we now?
II. Demographics – Where are we going?
III. Scenarios
IV. Product Update

4. HiddenLevers
DEMOGRAPHICS – WHERE ARE WE NOW?

5. USA – Current age demographics
Reading population graphs
Show distribution of various age groups in
a population
• Pyramid = expanding
more young people + less old people
• House = stationary
young people + seniors emerging
• Kite = contracting
more old people + not reproducing
• Wide base pyramid = youth bulge
social unrest + recessions
More on population pyramids

6. INDIA
expanding
BRAZIL
contracting
CHINA
contracting
(birth policy)
Comparison – Age demographics as Destiny
Middle-East
Youth Bulge Evident
Egypt
Jordan
Gaza
Yemen

7. USA – current diversity demographics
• Minority babies exceeded
white babies in late 2011
• Recent projections show
whites falling below 50% of
total population by 2050.

8. US Election Demographics: 1980 vs 2012
88%
10%
2%
1980 Presidential Election
Sources: UConn Roper Center Archives, 2012 Exit Polling
72%
13%
10%
5%
2012 Presidential Election
White Black Hispanic Other
• Brookings Institute: Minorities likely decided 2012 election
• 2012 - most racially polarized election in history

9. DEMOGRAPHICS – WHERE ARE WE GOING?
HiddenLevers

10. US Age Demographics - Projected
US population aging rapidly, but base of
pyramid should remain in tact
2010 2050

11. USA Age Demographics - International Context
bottom line
1. USA in better shape than Europe + Japan
2. USA in no worse shape than China
• US fertility rate at roughly replacement
level of 2.1, compared to Japan at 1.36
• US non-immigrant population is aging
rapidly, as in Europe + Japan
(US is one generation behind them)
• Majority of US population growth to
2050 expected to be via immigration
(contrast to 0 immigration in Japan)
• Despite aging of America, US working
age population in 2050 will be around
300 million, equaling today’s total
population

12. Japan: Will USA follow same pattern?
healthy age demographics … not so much

13. Japan: Demographic Disaster in Slow-Motion
Japan population aging into dustbin
Who you callin’
dependent?

14. Japan: Demographics + GDP
bottom line
YOUNGER POPULATION =
SUSTAINABLE GDP GROWTH
I knew it was da yoots.

15. USA – Diversity Projections
Virtually all future US population growth among minorities
• White + Black steady. Hispanic grows most
• Population growth since 1980 from immigration: 58%
• Population growth until 2050 from immigration: 80%
• GDP growth depends on education of immigrants
No, we are not
turning Japanese
Fruits

16. Immigration – Busted Myths
Myth
1. Mexicans coming in droves
2. Immigrants taking US jobs
3. Immigration at all-time highs
Reality
• Net Migration from Mexico now negative
• border arrests down 50% since 2008
• Illegal immigrant population not growing
• 12.5% of population, 15% of workforce
• overrepresented due to aging domestics
• 14.9% of population was immigrants in
1890. Currently 12.5%
• Two thirds legal, one third illegal
• 10.8 illegals – 40% came in legally

17. DEMOGRAPHICS - SCENARIOS
HiddenLevers
Baby Bust Brain Drain Beneficiary

18. Downside Scenario: Aging Baby Boomers
SF Federal Reserve
• Direct relationship between age
demographics + P/E ratios
• Baby boomers aging, withdrawing
from markets
• Downturn continues into 2020’s

19. Upside Scenario: Brain Drain Beneficiaries
bottom line
developed country realities mean
immigration is a necessity for growth
Smart immigration can avert Baby Bust
• Merit-based immigration reform
• Making it easy for world’s best +
brightest to come to USA
• Educating children of immigrants
already here
• Smart immigrants = GDP growth back
above 3%

20. Guidance
1. Successful immigration form based on merit
2. GDP growth back above 3% due to immigration
3. Increased spending due to prime working-age
immigrants
4. Only chance for GDP growth in developed countries
Demographics – Baby Bust or Brain Drain Beneficiary?
Guidance
1. Baby Boomers withdrawing assets to fund
retirement
2. GDP stagnant to declining, similar to Japan
3. Retail Sales takes a hit as Boomers stop spending
5. SF Fed research projects nearly 50% drop in S&P

21. HiddenLevers – Product Update
• Interactive Lead Generation App
• Integrations: - Schwab Portfolio Center
- Fortigent
• UI: Buttons + Sorting of Advanced Stats
Coming soon:
1. PDF-friendly versions of all HiddenLevers pages
2. Annual feedback session - what do you want to see?