welcome to demographics school n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Welcome to Demographics School PowerPoint Presentation
Download Presentation
Welcome to Demographics School

Loading in 2 Seconds...

play fullscreen
1 / 90

Welcome to Demographics School - PowerPoint PPT Presentation


  • 87 Views
  • Uploaded on

Welcome to Demographics School. presented by Rodney Johnson President, HS Dent. 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

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Welcome to Demographics School' - kane


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
welcome to demographics school
Welcome to Demographics School

presented by

Rodney Johnson

President, HS Dent

hs dent
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

3. Technological innovation acceptance rates

economics have two levels
Economics Have Two Levels

Macro Economics – Large trends

Micro Economics – individual choices

Macroeconomists are wrong about big things

Microeconomists are wrong about lots of little things

economics relies on the rational man principle
Economics Relies on the Rational Man Principle

Each consumer will make a rational choice when faced with a trade off in his or her personal situation.

Think of all the decisions you have made. Think of all the decisions you see others make.

We’re screwed.

economic change depends on the herd
Economic Change Depends on the Herd

Figure out why people do things.

Find the main source of economic and emotional pain in people’s lives.

What is driving their decision-making?

Kids.

More to the point – mapping out a plan for the family.

what you will learn
What You Will Learn

Background of economics

The sources of our research

The statistics involved (good and bad)

What the Average American looks like

Three main tools of HS Dent research – demographics, predictable spending patterns, technology innovation and acceptance

What lies ahead

what you will be able to do
What You Will Be Able To Do

Describe how modern, industrialized economies work

See the next economic “season”

Estimate changes to businesses, investors, and even countries

Highlight the opportunities and risks in the next 3, 5,10 and 20 years

economics
Economics

Malthusian Economics

Classical Economics

Keynesian Economics

Austrian School

malthusian economics
Malthusian Economics

Scarcity

Current technology

Population (crowd-out)

classical economics
Classical Economics

Input of Labor

All inputs are incremental

Always moving toward full employment by shifting inputs to where needed

keynes animal spirits
Keynes’ Animal Spirits

The colorful name that Keynes gave to one of the essential ingredients of economic prosperity: confidence. According to Keynes, animal spirits are a particular sort of confidence, "naive optimism". He meant this in the sense that, for entrepreneurs in particular, "the thought of ultimate loss which often overtakes pioneers, as experience undoubtedly tells us and them, is put aside as a healthy man puts aside the expectation of death". Where these animal spirits come from is something of a mystery. Certainly, attempts by politicians and others to talk up confidence by making optimistic noises about economic prospects have rarely done much good.

Economist.com

basics of hayek austrian school
Basics of Hayek(Austrian School)

Free markets allow best allocation of resources

Government intervention (interest rates and other monetary policy ) causes mal-investment

Those mal-investments must be worked out of system over time

It is the BOOM that should scare you!

hayekian triangle
Hayekian Triangle

Mises Institute

why does the fed exist
Why Does the Fed Exist?

Response to bank panic of 1908

End regional currencies

Stop runs on banks

amended monetary act 1913
Amended Monetary Act 1913

…the Fed "shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates."

  • www.federalreserve.gov
  • www.federalreserve.gov/kids
federal funds target rate 2003 april 2012
Federal Funds Target Rate2003- April 2012

Data Source: Federal Reserve, 2012

30 year 10 year and fed funds 1988 february 2012
30-Year, 10-Year, and Fed Funds1988 - February 2012

Data Source: Federal Reserve, 2012

federal reserve balance sheet 2007 2012
Federal Reserve Balance Sheet 2007-2012

QE 2

First Response to Crisis

QE 1

In Trillions

Before Financial Crisis

Data Source: Federal Reserve, 2012

fed actions
Fed Actions

Lower short term interest rates

Inject liquidity by purchasing illiquid assets

Long-term Security Asset Purchase

(QE1, QELite, QE2)

Operation Twist

what about gold
What About Gold?

Held to $20.67/oz. from 1860s through 1933

Made illegal to hold gold personally in 1933

Moved to $35/oz. under Roosevelt

Remained until 1971 when Nixon closed the Gold Window

Legal to hold gold again in 1976

gold average annual price 1900 march 2012
Gold, Average Annual Price1900- March 2012

Data Source: World Gold Council, 2012

why gold will not become currency
Why Gold Will Not Become Currency

Everyone would have to adopt at same time or risk ruinous rise (see Swiss)

Removal of lever for adjusting business cycle (prices versus currency value)

Loss of control on the part of government

the immigration adjusted birth index
The Immigration Adjusted Birth Index

Immigration Adjusted Births

demographics1
Demographics

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

slide35

Change in Spending at each Age & Stage of Life

46-50

Family,

College

Kids

22-30

Young

Married

31-42

Young

Family

50+

Empty

Nesters

18-22

Single

60+

Retired

boomers are not different
Boomers Are Not Different!

Front end of Boomer generation began retiring in 2003

Wave continues through 2025

Spending STILL PEAKS approx. age 48-50

the adult life cycle
The Adult Life Cycle

Education (college, trade school, etc.)

Workforce

Apartments

Marriage

Children

Home purchase

Second home purchase

Children leave

Pay down debts

Save for retirement

Vacation property

Retirement property

only works for some
Only Works for Some

Economies must be

Industrialized

Modernized

Democratized in terms of consumers holding funds

who spends what in the economy 2011
Who Spends What in the Economy2011

Data Source: Bureau of Economic Analysis, 2012

slide40

Who Spends What in the

Economy 2002-2010

Data Source: Bureau of Economic Analysis, 2012

composition of u s gross domestic product 1929 2010

Composition of U.S. Gross Domestic Product 1929-2010

Source: Bureau of Economic Analysis

who spends what in the economy 20111
Who Spends What in the Economy2011

Data Source: Bureau of Economic Analysis, HS Dent Research, 2012

slide43

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

Data Source: Bureau of Economic Analysis, HS Dent Research, 2012

percent of personal income contributed by government programs
Percent of Personal Income Contributed by Government Programs

Source: BEA, HS Dent Research, 2012

total government transfer payments 2002 2010
Total Government Transfer Payments 2002-2010

Billions of dollars

Data Source: Bureau of Economic Analysis, 2012

slide46

Real Personal Consumption Expenditures1995 – 2011

Billions of Chained 2005 Dollars

Data Source: Bureau of Economic Analysis, 2012

slide47

Real Personal Consumption Expenditures 1995 - 2011

Missing Growth

Billions of Chained 2005 Dollars

Data Source: Bureau of Economic Analysis, 2012

composition of u s personal consumption expenditures

Composition of U.S. Personal Consumption Expenditures

Data Source: Bureau of Economic Analysis, 2011

potato chip purchases by age
Potato Chip Purchases by Age

$ Per Year

Age of Head of Household

42

motorcycle sales by age
Motorcycle Sales by Age

45-49

$ Per Year

Age of Head of Household

harley s biggest problem
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.”

spending on drugs
Spending on Drugs

Source: Consumer Expenditure Survey

electricity
Electricity

Source: Consumer Expenditure Survey

the immigration adjusted birth index1
The Immigration Adjusted Birth Index

Immigration Adjusted Births

slide59

The Spending Wave

Births Lagged for Peak in Family Spending

Data Source: HS Dent Research, U.S. Census Bureau, Bloomberg, 2011

the spending wave births lagged for peak spending
The Spending WaveBirthsLagged for Peak Spending

Dow Adjusted for Inflation

Immigration-adjusted Births Lagged for Peak Spending

Data Source: HS Dent Research, U.S. Census Bureau, Bloomberg, 2012

age stage of life determine spending patterns
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/

daily u s consumer spending 2008 march 2012
Daily U.S. Consumer Spending2008-March 2012

Monthly Average

Data Source: www.gallup.com, 2012

past forecasts
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)

japanese stock market vs change in consumer spending 1 987 march 2012
Japanese Stock Market vs. Change in Consumer Spending 1987 – March 2012

Nikkei Average

Change in Consumer Spending

Data Source: Japanese Family Income and Expenditure Survey; Yahoo Finance, 2012

the rise of non regular workers in japan
The Rise of Non-Regular Workers in Japan

Percentage of Non-Regular Employees

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

percentage of workers earning less than 20 000 by category
Percentage of Workers Earning Less Than $20,000, by Category

Only 1% Earn More Than $30,000

Less Than 2% Earn More Than $30,000

Over 67% Earn More Than $30,000

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

percentage of workers earning less than 20 000 by category1
Percentage of Workers Earning Less Than $20,000, by Category

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

quantity of money formula for inflation
Quantity of Money Formula for Inflation

MV=PY

M=Money Supply P=General Price Level

V=Velocity Y=Real Income

inflation indicator
Inflation Indicator

LABOR FORCE GROWTH

2.5-YR LAG

INFLATION (CPI)

Data Source: Bureau of Labor Statistics, HS Dent, 2011

inflation forecast
Inflation Forecast

20 Year-Olds

on a 3-Year Lag

Minus 63 Year-Olds

Inflation

Annual Inflation (%)

Annual Labor Force Growth

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

inflation
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

inflation fears are misguided it s deflation that will hurt
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!

the value of m is the size of the money supply
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

lending dollars into existence fractional reserve
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.

money creation works both ways
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.

total u s debt 2008
Total U.S. Debt - 2008

Government

$14Trn

Financial

$17Trn

Corporate

$11Trn

Consumer

$14Trn

Total:

$56 Trn !

Source: Federal Reserve Flow of Funds Report

total u s debt 2011
Total U.S. Debt – 2011

Government

$18.2Trn

Financial

$13.5Trn

Foreign

$2.2Trn

Corporate

$11.6Trn

Consumer

$12.3Trn

Total:

$57.8 Trn

Data Source: Federal Reserve Flow of Funds Report, 2012

change in debt outstanding 2000 2010
Change in Debt Outstanding 2000 - 2010

Source: Federal Reserve Flow of Funds Report (FRB Z1)

change in u s debt outstanding 2000 2011
Change in U.S. Debt Outstanding 2000 - 2011

In Billions of USD

Data Source: Federal Reserve Flow of Funds Report (FRB Z1), 2012

consumer credit by category 2006 2011
Consumer Credit by Category2006-2011

In Billions of USD

Data Source: Federal Reserve Flow of Funds Report, 2012

growth of consumer credit 2006 2011
Growth of Consumer Credit2006-2011

Index 100= 2006

Data Source: Federal Reserve Flow of Funds Report, 2012

growth of consumer credit 2006 20111
Growth of Consumer Credit2006-2011

Index 100= 2006

Data Source: Federal Reserve Flow of Funds Report, 2012

total consumer credit 1980 2011
Total Consumer Credit1980-2011

In Billions of USD

Data Source: Federal Reserve Flow of Funds Report, 2012

the money supply fight
The Money Supply Fight

The Fed Is Pouring Money In

Amount of Money in the Economy

While Borrowers and Lenders are Leaking Money Out