October 19, 2010 – If Demographics is Destiny, Then America’s Future Sucks

(SPY), (EWJ), (VNM), (EEM)


1) If Demographics is Destiny, Then America's Future Sucks.
Desperate homeowners counting on a "V" shaped recovery in residential real estate prices to bail them out better first take a close look at global demographic data, which tells us there will be no recovery at all.

I have been using the US Census Bureau's population pyramids as a long leading indicator of housing, economic, and financial market trends for the last four decades. They are easy to read, free, and available online at http://www.census.gov/ . It turns out that population pyramids are something you can trade, buying the good ones and shorting the bad ones. For example, these graphical tools told me in 1980 that I had to sell any real estate I owned in the US by 2005, or face disaster.

No doubt hedge fund master John Paulson was looking at the same data when he took out a massive short in subprime securities, earning himself a handy $4 billion bonus in 2007. To see what I am talking about, look at the population pyramid for Vietnam. This shows a high birth rate producing ever rising numbers of consumers to buy more products, generating a rising tide of corporate earnings, leading to outsized economic growth without the social service burden of an aged population. This is where you want to own the stocks and currencies.