Social Trends & Investment
Demographics is a powerful barometer of social change. And social change drives much of political and economic changes. Put the two and two together, it is crucial for an investor to be aware of, and familiar with shifting population and geological trends. Here are some to help you out in this department.
A couple of days ago, a fellow blogger commented on this rather unfortunate Fortune article on his blog. It is interesting for several reasons.
First, the ideas are cookie-cutter and stale. Us Gen Yers had been told (to a certain extent) that we were on the cusp of a great demographic shift, where baby boomers’ impending departure would wreak havoc on corporate health. True, some of us were led to believe that our contribution would be valued at a premium, which would in turn translate into lots of choices and result in us hopping through the corporate environment at break-neck speed. In reality? Highly unlikely. The smart ones among us always knew that good jobs are competitive, and supply almost always outstrip demand, especially at the bottom rung. But the media kept up the propaganda – to what end, I don’t know. Every once in a while, articles like this appear.
Second, the timing is totally off. Because of economic realities, many boomers simply can’t afford to retire. More and more Gen Yers find themselves in a much more competitive environment than they were led to believe. Now everybody is learning to make do with less and to compromise. Exactly who is out pandering to those misunderstood geniuses, I’m not sure.
The somewhat hilarious prescriptions thrown around by the Fortune writer, and the kick my blogger friend got out of it, reminds me of a book I heard about recently. In this book, the authors address the various social and consumerist constructions of the Gen Y generation. I took some notes, here’s a broad overview of the ideas.
School: the obsession with feeling good at all cost
According to the book, the ME culture evolved over several decades, but found its decisive start within the school system. The baby boomer generation struck out, rejected authority and tried to find its own path. In their children, they instituted and obsessed over instilling self-esteem. Subsequently, various forms of formal, or informal self-esteem programs were introduced in school. They generally aim to make children feel good about themselves at all times and at all cost, with messages like: you are special, you are unique, you are fine just the way you are. Read more...
Bloggers Unite declared today Unite for Hunger and Hope day. I’m sure many posts are going up to get you to donate, to sign some kind of petition for debt relief, or in the least, just to care. Do you care? And with so many problems plaguing our lives, and the world in general, should you care? It’s not a rhetorical question. I am not sure I can overcome apathy.
To say that one doesn’t care about world hunger or poverty, is like saying one doesn’t care about the environment or basic tenements of human rights. But the images of starving children, whether they are of of the skeletal child brides variety out of India, or children with extended bellies with flies around their faces out of Africa, never really resonated with me.
There are two reasons for this.
Studies have shown that anti-smoking campaigns in schools largely fail if the program is overly reliant on the shocking the test subjects into giving up. If overly graphic images are shown – of black lungs, or the inside of a sufferer of throat cancer, students become so repulsed by the imageries, that they become detached from the message altogether. Similarly, when I see those pitiful pictures of hungry children, their plight seems so fundamentally wretched, my sympathies and emotional triggers are overwhelmed, and I block out the situation altogether.
Secondly, I have come to realize that images of humanitarian crises are constructed by professionals with an agenda. This is not to imply that journalists and photographers that take those pictures have malicious intentions. But it is important to know that behind every still and live image, there are a team of people actively managing our responses. The media create a range of identities so selective and arbitrary – us versus them, victim versus saviour, they effectively create a disaster when they decide to recognize it. Read more...
Don Coxe is an investment strategist. But unlike most investment strategists that flaunt degrees in mathematics or quantum physics, Coxe is a curious historian. At 73, his curiosity has yet to wane, and his quarterly newsletter Basic Points has followed him from his old employer BMO to his new investment advisory business.
He makes investment a fun pursuit, not only of numbers, but of knowledge. In his own word, he studies history to “compare popular views about economics, finance, geopolitics with evidence of what has happened in various eras.” And making money is merely a financially rewarding byproduct of that pursuit.
In his March edition of Basic Points, Coxe drew my attention to a few points rarely discussed by investment advisors and analysts in the mainstream. Let’s see what they are.
Lack of sunspot activities and possible crop failures
Most of us are aware that the earth has been warming up in the last couple of centuries. The rise of environmentalism makes sure of that, and Gore’s Inconvenient Truth enforces that belief. As humans, we are no doubt responsible for the unprecedented level of pollution and degradation to our natural habitats. But the feverish pitch of the environmentalists has become dogmatic in recent years, and any dissent over either methodology or the validity of data that supports their belief is deemed treasonous.
As much as environmental awareness is a more than commendable cause, the sensationalism and the selectivity over the type of news and data that make it to the front page has been astounding. Bloopers are swept into the background, and wildly pessimistic and sensationalistic pieces inject more fear and exaggerated claims into mainstream conversations. We are all for a better living environment, but no end justifies the means if facts and truths are misrepresented in the process. The public will turn their backs on the cause, no matter how noble it may be. Read more...
This is part two of a two part post on the importance of demographics on one’s investment choices. Part one addresses the perils of neglecting demographics, and today’s post will discuss investment ideas backed up by demographic trends.
The more sensible consumer mentality may also be applied to investments. For years, we have invested in trends that most people do not understand – many had little fundamental support behind it other than the sheer force of market momentum. The foolishness of that collective decision is reflected in overall market returns: during the past decade, the stock market has not treated us well.
Perhaps it’s time to look at investments that have the solid support of demographics and real demand behind it? Is it any surprise that during this crisis, Best Buy is down 47% and Family Dollar Stores are up 30%? Before the fundamental disarrays of the economy are addressed, it’s safe to say that products and services that meet essential needs will stick around. On a side note, would it also make a lot of sense to retrain those laid-off workers from the previous fluff economy in those fields that have long-term demands? Now going back to the idea of ongoing demands, here are some thoughts.
Follow the demands of the aging population and pay attention to healthcare related companies not run by crooks. In most of the developed countries, healthcare needs are hardly abating. The demands for various levels of medical care in the forms of doctors, nurses, medication, medical equipments, and assisted living will continue to rise every year. Yet the broken Medicare system in the US, along with issues of patents, the emergence of scandals and ethics quandaries related to the pharmaceutical industries, have tainted the industry reputation and sidetracked the dire issue on hand. But with pressing demands that will continue rising with time, it is an industry that demographers would pay close attention to.
Read more...
This is a two-part article that addresses economic and investment implications of demographic trends. Today, I look at what happens when we ignore demographics. In tomorrow’s column, I look at some investment opportunities supported by population and demand trends.
I still remember presenting David Foot’s book “Boom, Bust, and Echo” in my high school economics class. It was the first time I was exposed to the idea. It was clear, succinct, and for me, absolutely mind-blowing (I was 17, ok?). Its sociological, marketing, economic and political implications kept me engaged and excited for weeks leading up to my talk. I still remember feeling exasperated at not being able to present the explanatory power of this concept within an hour of allotted time. This was before Powerpoint came along to provide structural assistance and graphics entertainment. So God bless my fellow classmates for sitting through the hour of what must’ve been an excruciatingly boring experience: me, with questionable level of articulateness, wildly gesticulating with my right hand, while waving pages of notes with my left.
It’s been a while since high school, and the over-use and abuse of the term has since left me disillusioned with its clairvoyance. The rest of the world must have discovered the magical potential of a concept that is always readily available to provide digestible explanations for, well, everything.
When I worked in the oil boom town of Calgary in western Canada, any high school drop-out rig worker or administrative assistant, when asked about the sustainability of sky-rocket crude prices, would shrug their shoulders and say: it’s China and India, they need oil, it’s all about demographics. The same line of reasoning was used to explain the rise of food prices last year: developing countries are getting richer and eating better, there’s an increase in demand, again, it’s demographics. The same explanation sufficed for the bio-tech and pharmaceutical stock rally every few years: the baby boomers, they’re getting older and need medication, it’s demographics! Read more...
Do you remember what the most attention-grabbing headline was a year ago? Before the US decided to embrace the “change” administration, before the credit bubble burst, before the cracks in the financial system started to appear for all to see, the Olympic was still in the future, and Michael Phelps and Bernard Madoff were yet to become household names . Yes, that time. Do you remember what dominated the headlines then?
The global food crisis.
That, along with a general global resource shortage, seemed to be what was on most people’s mind. It was hard not to notice. All around the world, the grocery bill, along with the gasoline prices, seem to follow an unwavering upward trajectory.
The media loved the story. Theories of “the perfect storm” emerged to explain the rise: population growth, change in diets, irregular weather affecting harvest, higher transportation costs, and the drive towards bio-fuels.
Then the global financial crisis hit, and we suddenly had bigger problems to worry about, i.e., our pension plans and investment portfolio cut by half. Commodity prices started to fall, including agricultural food prices, the grocery bill’s upward march is temporarily stalled.
Then just like that, the food crisis front went quiet.
Has the global food crisis gone away? Has the hand of the market somehow corrected the excessive rise of grain prices, and we no longer have a supply problem?
No, of course not. The fundamental factors that drove prices up last year has changed little. The demand from the increasingly hungry consumers from the emerging markets still remains, albeit the growth of demand may have slowed slightly as a result of the financial sector snafu.
Yet with tight money all over, we are faced with an increasingly dire supply situation. Reduced international aids and banking lending could cause farmers to cut back on their plantings, which may lead to reduced harvests in some major exporting countries. Lower food prices on the international market can make farming a losing proposition in certain parts of the world, further reducing the crop output. And the sheer volatility of food prices, as demonstrated in the last two years, are making it increasingly difficult for farmers to plan and invest. Read more...
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