War Room 06 Dec 2012

Demographics They are a changin

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

Demographics They are a changin

I.
II. III. IV.

Demographics Where are we now?

Demographics Where are we going? Scenarios Product Update

HiddenLevers

DEMOGRAPHICS WHERE ARE WE NOW?

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

Comparison Age demographics as Destiny

INDIA
expanding Middle-East Youth Bulge Evident
Egypt

Jordan

BRAZIL
contracting

Gaza

Yemen

CHINA
contracting (birth policy)

USA current diversity demographics

Minority babies exceeded white babies in late 2011 Recent projections show whites falling below 50% of total population by 2050.

US Election Demographics: 1980 vs 2012

1980 Presidential Election
10% 2%

2012 Presidential Election

5% 10%
13%

Sources: UConn Roper Center Archives, 2012 Exit Polling

88%

72%

White

Black

Hispanic

Other

Brookings Institute: Minorities likely decided 2012 election 2012 - most racially polarized election in history

HiddenLevers

DEMOGRAPHICS WHERE ARE WE GOING?

US Age Demographics - Projected

2010

2050

US population aging rapidly, but base of pyramid should remain in tact

USA Age Demographics - International Context

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 todays total population

bottom line 1. USA in better shape than Europe + Japan 2. USA in no worse shape than China

Japan: Will USA follow same pattern?

healthy age demographics

not so much

Japan: Demographic Disaster in Slow-Motion

Who you callin dependent?

Japan population aging into dustbin

Japan: Demographics + GDP

I knew it was da yoots.

bottom line
YOUNGER POPULATION = SUSTAINABLE GDP GROWTH

USA Diversity Projections

Virtually all future US population growth among minorities White + Black steady. Hispanic grows most
No, we are not turning Japanese

Population growth since 1980 from immigration: 58%

Population growth until 2050 from immigration: 80% GDP growth depends on education of immigrants

Fruits

Immigration Busted Myths

Myth 1. Mexicans coming in droves

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

2. Immigrants taking US jobs

3. Immigration at all-time highs 14.9% of population was immigrants in 1890. Currently 12.5% Two thirds legal, one third illegal 10.8 illegals 40% came in legally

HiddenLevers

Baby Bust

Brain Drain Beneficiary

DEMOGRAPHICS - SCENARIOS

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 2020s

Upside Scenario: Brain Drain Beneficiaries

Smart immigration can avert Baby Bust Merit-based immigration reform Making it easy for worlds best + brightest to come to USA Educating children of immigrants already here Smart immigrants = GDP growth back above 3%

bottom line developed country realities mean immigration is a necessity for growth

Demographics Baby Bust or Brain Drain Beneficiary?

Guidance 1. Baby Boomers withdrawing assets to fund retirement GDP stagnant to declining, similar to Japan Retail Sales takes a hit as Boomers stop spending SF Fed research projects nearly 50% drop in S&P

Guidance 1. 2. 3. Successful immigration form based on merit GDP growth back above 3% due to immigration Increased spending due to prime working-age immigrants Only chance for GDP growth in developed countries

2. 3. 5.

4.

HiddenLevers Product Update

Interactive Lead Generation App Integrations: - Schwab Portfolio Center - Fortigent

UI: Buttons + Sorting of Advanced Stats

Coming soon:
1. 2.

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