demographics school
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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 PresentationTRANSCRIPT
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 trends2. Predictable consumer spending patterns,
and3. Technological innovation acceptance rates
Demographics
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-
Average Immigrants per Year by Age 1945-2000
Source: US Census Bureau
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
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
Predictable Spending Patterns
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
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
Boomers Are Not Different!
Front end of Boomer generation began retiring in 2003
Wave continues through 2025
Spending STILL PEAKS approx. age 48-50
Education (college, trade school, etc.)WorkforceApartmentsMarriageChildrenHome purchaseSecond home purchaseChildren leavePay down debtsSave for retirementVacation propertyRetirement property
The Adult Life Cycle
Only Works for Some
Economies must be IndustrializedModernizedDemocratized in terms of
consumers holding funds
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
-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
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
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
-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
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
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
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
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
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
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
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
This Is What You See
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
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
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
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
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.”
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
Personal Care Services For Females, Including Haircuts
Source: Consumer Expenditure Survey
Source: Consumer Expenditure Survey
Spending on Drugs
Source: Consumer Expenditure Survey
Electricity
Fast Food for Lunch
Source: Consumer Expenditure Survey
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
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
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
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 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
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)
Contrary to popular belief, Americans really can pass The Marshmallow Test
We’ve Seen This Movie Before, Just Look To
The East
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
Japanese Nikkei IndexJan 1984 – Jan 1990
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
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
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
Percentage of Workers Earning Less Than $20,000, by Category
Source: Ministry of Internal Affairs and Communications (2007), Employment Status Survey, 2012
Inflation/Disinflation/Deflation
Quantity of Money Formula for Inflation
MV=PYM=Money Supply P=General Price Level
V=Velocity Y=Real Income
-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)
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
(%)
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 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
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)
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
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.
Government$14Trn
Financial$17Trn
Corporate$11Trn
Consumer$14TrnTotal:$56 Trn !
Source: Federal Reserve Flow of Funds Report
Total U.S. Debt - 2008
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
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
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
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
The Fed Is Pouring Money In
While Borrowers and Lenders are Leaking Money Out
Amount of Money in the Economy
The Money Supply Fight