Presentation on theme: "How Average Are You?. Live in same state (60%) Have 2 children Eat 3 lbs of PB per year Do NOT floss regularly (90%) Exercise once a week Recycle (50%)"— Presentation transcript:
How Average Are You?
Live in same state (60%) Have 2 children Eat 3 lbs of PB per year Do NOT floss regularly (90%) Exercise once a week Recycle (50%) Shop At Walmart at least Annually (80%) Believe God exists (80%) Larry, Mo, Curly (& Schemp) (89%) Legislative, Judicial, & Executive (20%) Does NOT have a college degree (65%) Take a bath or shower (10.4 minute shower, daily) Own stocks?( 50/50) How Average Are You?
Selected Average Statistics Drinks 55 gallons of soda a year Does not wash his hands properly after using public restrooms Throws away more than 100 lbs of food per year 25% of Americans over 18 abstain from alcohol for life 69% of Americans go to the movie theater at least annually
The Average American Federal Reserve Survey of Consumer Finance Median Family Income$46.7k$47.5k$47.3k College Degree34.0%36.6%35.3% Holds Credit Card Bal.44.4%46.2%46.1% Amount of Bal.$2.0k$2.4k$3.0k Of those Own Retirement Acct.63.4%57.7% 64.7% Amount in it$51.1k$61.0k$67.0k
Percent of Urban Households Cars only for the Rich Model T Design Assembly Line Installment Financing 90% Urban Adoption The S-Curve in Cars
Innovation GrowthMaturity Percent of Households Time 47% % 10% % 13% 77% % % 58% % 86% Source: Forrester, Census Bureau % 1% Mobile Phone S-Curve
Innovation GrowthMaturity Percent of Households Time Source: Pew Internet 10% % 17% 22% 61 % % 79% 73% 74% % 50% % 66% Internet S-Curve
Innovation GrowthMaturity Percent of Households Time 90% % 50% 37% 2004 Source: Pew Internet % % % 91% 2009 Broadband S-Curve
Innovation GrowthMaturity Percent of Households Time 90% 10% % 43% Source: Infotrends, Consumer Electronics Association 60% % Digital Camera S-Curve
Innovation GrowthMaturity Percent of Households Time 90% 10% 50% % 23% Source: CTAM 3% % High-Definition TV S-Curve
Innovation GrowthMaturity Percent of Households Time 90% 50% 99% Source: Masterlink 10% 3% 0.9% 1% % Car GPS Systems S-Curve
Source: NY Times S-Curves
Innovations follow a curved pattern of acceptance, or lifecycle Industry supplies on a different cycle Many innovations are moving through the second half of their growth phase, and will peak near the end of the decade Innovations tend to be developed by the young
Quantity of Money Formula for Inflation MV=PY M=Money Supply P=General Price Level V=Velocity Y=Real Income
Source: Calculated Risk Blog U.S. Inflation Year-Over-Year Change
Inflation Forecast Source: U.S. Census Bureau and U.S. Bureau of Labor and Statistics 20 Year-Olds on a 3-Year Lag Minus 63 Year-Olds 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 Its 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. Its 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!
When the US Crashed, the V dropped dramatically MV=PY M=Money Supply P=General Price Level V=Velocity Y=Real Income Quantity of Money Formula for Inflation
The Velocity of Money GDP to Adjusted Monetary Base Source: St. Louis Fed, US BEA
The Value of M Is the Size of the Money Supply Get your arms around how money is created 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
The Fed Was Injecting Cash with Quantitative Easing, Increasing M
The Added Money Was Offset By Less Velocity
It Hasnt Worked, So Now Fed Is Printing Dollars The Federal Reserve controls the printing presses of the US The Fed does NOT have a bank account. Any purchase they make (like of securities in the marketplace) is done with newly printed dollars The First $1.5 trillion didnt restart economy, but it has caused dollar devaluation. What will happen next?
Tug of War Between The Forces of Money Creation Why is the sheer force of printing money not working? Because at the same time, we are busy destroying money in other places
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.
Government $14Trn Financial $17Trn Corporate $11Trn Consumer $14Trn Total: $56 Trn ! Total U.S. Debt Source: Federal Reserve Flow of Funds Report
Money Creation Works Both Ways But it is already taking place, 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. Go back to the $1,000 deposit with the $900 loan. Money supply went from $1,000 to $1,900 when counting both the deposit and the loan. If the borrower of the new $900 pays off the loan, then money supply shrinks back to just $1,000. This is going on at a rapid pace as we pay down debts and see massive liquidations, bankruptcies, and foreclosures.
Change in U.S. Debt Outstanding Source: Federal Reserve Flow of Funds Report (FRB Z1), including Domestic Financial Sector
The Fed Is Pouring Money In While Borrowers and Lenders are Leaking Money Out Amount of Money in the Economy The Money Supply Fight
The Business Cycle and Seasons of the Economy
Combining Generational Spending Trends, Inflation, and Interest Rates 40 year generations Predictable consumer spending Workforce pressure on inflation Ebb & flow of interest rates
Spring Summer FallWinter Stocks/ Economy Generation Spending Boom Simple Four Season Economic Cycle Two Forty-Year Generation Boom/Bust Cycles
Spring Summer FallWinter Stocks/ Economy Generation Spending Boom Consumer Prices/ Inflation Simple Four Season Economic Cycle Eighty Years in Modern Times
VIDEO Chris Martenson, Crash Course Fuzzy Numbers
Investing In Each Season What you are told vs. what really happens
Attention, Demographics, and the Stock Market Stephano DellaVigna and Joshua M. Pollet March 2005
Attention, Demographics, and the Stock Market, 2005 Their findings are consistent with H.S. Dent: Taken as a whole, the evidence suggests that changes in age structure of the population have the power to influence consumption demand in a substantial and consistent manner.
Attention, Demographics, and the Stock Market, 2005 What people THINK happens – Efficient Market Hypothesis What really DOES happen – inefficient distribution, understanding, and comprehension of important data
Attention, Demographics, and the Stock Market, 2005 And, quantifying our own observations: One additional percentage point of annualized demand growth due to demographics predicts a 5 to 10 percentage point increase in annual abnormal industry stock returns.
Attention, Demographics, and the Stock Market, 2005 These abnormal stock returns are possible because investors do not fully anticipate the effects of demographics in advance: [The data] indicates that stock prices adjust as the demographic information enters the forecast horizon. But… [The effect of] short-term demographics is…insignificant.
Why dont investors take into account long-term trends and changes? No access to forecasts of these changes – analysts do not make earnings forecasts beyond 5 years. Money Managers are rewarded on the short-term. Slow-moving, long-term changes are ignored in favor of short-term obvious events/changes.
Attention, Demographics, and the Stock Market, 2005 Our findings have implications for other economics decisions beyond portfolio allocation. Voters and consumers may neglect relevant information about long-term outcomes for their decisions [think Social Security! – HSD] Workers might disregard forecastable future demand changes in their choice of careers…
Harley Davidson vs. S&P
Harley Davidson vs. S&P 500 Oct 2005 – Sept 2007 (2 years)
Immigration & Migration
Immigration, NOT JOB HUNTING Historically, immigrants moved here to stay Now, immigrants come for work, no intention of staying
Immigration to the United States Source: U.S. Department of Homeland Security Article #7 & 8 Economy
Average Immigrants per Year by Age Source: US Census Bureau
White and Hispanic Populations by Age Source: US Census Bureau, 2000 Census
Movers to a Different State by Age Source: US Census Bureau
Movers to Different State: Young vs. Old 2000 to 2005 Source: US Census Bureau 3.5x In Thousands
% of Americans Moving Each Year Source: US Census Bureau
Source: New York Times State Population Growth
Source: United Van Lines, via Unigroup, Inc. United Van Lines Migration Patterns 2007
Source: United Van Lines, via Unigroup, Inc. United Van Lines Migration Patterns 2009
Source: United Van Lines, via Unigroup, Inc. State% Outbound Michigan68.0% Illinois58.2% New Jersey58.1% Indiana57.5% Pennsylvania57.4% North Dakota57.0% Minnesota56.5% Wisconsin56.3% Maine55.6% New Hampshire55.2% Top 10 Outbound States 2009
Source: United Van Lines, via Unigroup, Inc. State% Inbound ????????67.8% Oregon58.9% Arkansas57.7% Nevada57.2% Wyoming56.3% Idaho56.1% Colorado56.0% Georgia55.6% New Mexico55.5% Texas55.4% Top 10 Inbound States 2009
Source: United Van Lines, via Unigroup, Inc. State% Inbound Washington, DC67.8% Oregon58.9% Arkansas57.7% Nevada57.2% Wyoming56.3% Idaho56.1% Colorado56.0% Georgia55.6% New Mexico55.5% Texas55.4% Top 10 Inbound States 2009
Lack of Mobility from Downturn NYT April 23, 2009 Slump Creates Lack of Mobility for Americans By SAM ROBERTSSAM ROBERTS Stranded by the nationwide slump in housing and jobs, fewer Americans are moving, the Census Bureau said Wednesday.Census Bureau The bureau found that the number of people who changed residences declined to 35.2 million from March 2007 to March 2008, the lowest number since 1962, when the nation had 120 million fewer people.
Demographic Trends in Real Estate
Long Term House Prices vs. Inflation Source: Robert J. Shiller, Irrational Exuberance, 2nd Edition, Princeton University Press, 2005.
Spending 20 Age Vacation / Retirement Homes Resorts Vacation Homes Trade-Up Homes 31 Starter Homes 26 Apartments / Shopping Centers 21 Offices 18 Colleges Real Estate Spending Cycles
Source: Robert J. Shiller, Irrational Exuberance, 2nd Edition, Princeton University Press, Long Term House Prices vs. Inflation
Source: Robert J. Shiller, Irrational Exuberance, 2nd Edition, Princeton University Press, Long Term House Prices vs. Inflation
Source: Amherst Securities Pre-Tax Income Borrowing Power 2.8 times Borrowing Power of a Typical Home Purchaser
-55% -65% -33% Average US Home Prices January 1994 – August 2010 Source: Standard & Poors Case-Shiller US 10-City Index Seasonally Adjusted In Thousands
Case-Shiller Top Metro Areas Percent Decline from Peak Values -54% -52% -48%
Case-Shiller Top Metro Areas Percent Decline from Peak Values -54% -52% -48% -36% -34%
Case-Shiller Top Metro Areas Percent Decline from Peak Values -54% -52% -48% -36% -34% -11% - 8%
The Ticking Time Bomb Negative Equity by Mortgage Sector Source: Deutsche Bank August 5, 2009 Report Q1 2009Q Projected Total mortgage market26%48% Option ARM77%89% Subprime50%69% Alt-A49%66% Prime jumbo29%46% Conforming16%41%
Mortgage Defaults by Sector
Defaults in Prime Mortgages
First Time Defaults Inventory Overhang Liquidations Rising Mortgage Defaults
We are here Mortgage Resets What the Fed is Trying to Stop Source: Loan Performance, Amherst Securities
Home Price to Rent Ratio , rent = 1 in Q1 2000
Case-Shiller 20-City Home Price Index Source: Standard & Poors Case-Shiller US 20-City Home Price Index Seasonally Adjusted In Thousands
Source: Calculated Risk Blog NAHB Housing Market Index and Single Family Starts
New Home Sales January September 2010 Source: US Census Bureau Seasonally Adjusted In Thousands
New Push on Mortgage Relief, WSJ, 11/30/09, A3 Defaults and Lost Homes 2000 – 2012 (est.)
Changes in The World Around Us
US Population 2010
French Population 2010
UK Population 2010
Italian Population 2010
Japan Population 2010
S. Korea Population 2010
Chinese Population 2010
Chinas One-Child Policy Still Active China Bolsters One-Child Policy By NICHOLAS ZAMISKA, January 8, 2008; Page A14, WSJ The Chinese government is seeking to shore up the aging family- planning policy that has proved resilient since its inception in the late 1970s. The policy limits most urban couples to one child and broadly promotes small families throughout the country. Fines are a common punishment. Prof. Zhou found through her research that for those who can't afford the fines, the government may still force women to undergo sterilization surgery in addition to confiscating whatever assets they can. "They take your pigs, your water buffalo. They take everything so you have nothing," she says. Reports still surface of family-planning officials, who are often under intense government pressure to ensure that births in their districts don't exceed certain quotas, forcing women to have abortions.
And Still Wreaking Havoc Chinese Bias for Baby Boys Creates a Gap of 32 Million, Sharon LaFraniere, 4/11/09, A5, NYT A bias in favor of male offspring has left China with 32 million more boys under the age of 20 than girls, creating an imminent generation of excess men, a study released Friday said. In 2005, they found, births of boys in China exceeded births of girls by more than 1.1 million. There were 120 boys born for every 100 girls. They attributed the imbalance almost entirely to couples decisions to abort female fetuses.
But the Government Isnt Totally Oblivious China has relaxed one-child policy in Shanghai as 1 in 5 of its population is currently over 60 Now, if a couple is comprised of 2 only children, they are allowed to have a 2 nd child Even so, by 2020, 1 in 3 in the population are expected to be over 60.
Indian Population 2010
Brazilian Population 2010
Mexican Population 2010
Turkish Population 2010
Russian Population 2010
The Situation in Russia Is so Bad That… In 2007 President Putin declared 2008 the Year of the Family. Sept. 12, 2007 was made into a holiday called Family Contact Day. Russians were encouraged to stay home and engage in marital intimacy in the hopes of producing children on Russia Day, nine months later, on June 12, The new holiday extends Russias promotion of procreation, urging couples not only to have children but also to provide those children with two- parent, stable family lives.
It Didnt Work Russias population stands at 141 million people and is falling. The country shrank by over 600,000 people, about 1/2%, in 2008 because of declining birth rates as well as falling life spans.
India Spending Wave
China Spending Wave
Japan Spending Wave
Source: Investors Business Daily, 4/22/2004, Pg A16 In billions Total World Population Projection for
Health & Wealth Around the World Hans Rosling TED Presentation