The Cost Of An Aging World

Summary
They go a long way towards explaining if asset prices are facing a long-term structural headwind or tailwind.

The great thing about the data is that you can get precise, high quality numbers 20, or even 50 years in advance.

Regular readers are well aware of my fascination with demographics as a market driver.

They go a long way towards explaining if asset prices are facing a long-term structural headwind or tailwind.

The great thing about the data is that you can get precise, high quality numbers 20, or even 50 years in advance. No matter how hard governments may try, you can't change the number of people born 20 years ago.

Ignore them at your peril. Those who failed to anticipate the coming retirement of the baby boomer generation in 2006 all found themselves horribly long and wrong in the market crash that followed shortly.

Currently, only Japan (26.4%), Italy (21.7%) and Germany are so burdened with that number of old age pensioners. France (18.7%), Switzerland (18.2%), and the UK (18.1%) are about to join the club.

The implication is that the global demographic dividend the world has enjoyed over the last 40 years is about to turn into a tax, a big one.



http://seekingalpha.com/article/3974920-cost-aging-world?ifp=0
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1) In fact, I would suggest the Demographic influence is actually likely to extend beyond the 50 year mark, perhaps going out as long as 70-80 years!
2) Governments &/or CB's MAY well be able to influence "some" Demographic outcomes, But that would depend on the nature & size of the Demographics.
In the current example, of the Baby Boomer generation, Governments & CB's are VERY UNLIKELY TO SUCCEED IN SUBSTANTIALLY CHANGING OUTCOMES, certainly they can not change things back to how they were!
In addition to Demographic issues, there are also the following factors, which are also in play -
1) Energy - Supply, Demand & Pricing
2) Climate Change
3) Debt - Already Large & Growing rapidly

Mother Of All Head And Shoulder Patterns And China Just Completed The Right Shoulder

The global economy and finance are all about growth (increasing flow) and not about equilibrium (stock). The ultimate driver of growing economies and finance has been millenniums of population growth. A growing quantity of people has meant more buyers, more consumers, more demand. So, if the growth or flow of demand is waning... that should matter... a lot.
Like entering an ice age after 10,000 years of warm. The expected response to something like that would be all out. Not a surprise that 4 decades of interest rate cuts have been used to incent a decelerating base of consumer growth to debts untold. It's all in an attempt to maintain centrally determined rates of growth far above what rising population, jobs, wages and savings can sustain.

Quantity of Growth
Take a gander at the chart below, annual global population growth from 1950 to present and the OECD population growth estimations through 2050. You might notice a... HEAD AND SHOULDERS pattern!!! 1988 was the head of annual global population growth... 1973 was the left shoulder and 2012 was the right shoulder.
(see article for charts)

Conclusion
China was, in essence, the right shoulder to the greatest head and shoulder pattern in the history of mankind. Central banks and federal governments will do everything in their power to maintain the present system. They will attempt anything and likely everything to maintain what ultimately cannot be maintained. Unfortunately, no one knows how much is too much and the economic, financial and societal ramifications. Invest accordingly?!?

http://seekingalpha.com/article/3976555-mother-head-shoulder-patterns-china-just...
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I would suggest, as I have, that Demographics, Energy & Climate Change, will bring about some massive changes!

http://pro.wallstreetdaily.com/TAO_ROGERS_EXT/LTAOS575/?h=true

Reserve Bank governor Glenn Stevens says election winner faces 'years' of budget repair

The outgoing central bank governor, Glenn Stevens, has declared whomever wins the federal election on 2 July will inherit substantial heavy lifting on budget repair, as the campaign descended into a day of partisan finger-pointing about budget “black holes”.

In comments anticipated to be his final public intervention before leaving the Reserve Bank of Australia, Stevens said the bank concurred with updated forecasts produced by Treasury last week about the state of the nation’s books but he said the official outlook amounted to everything is OK as long as nothing goes wrong.

“The budgetary situation will be OK if nothing else goes wrong,” Stevens told his audience in Sydney. “You can’t really assume in life that nothing will go wrong over an an extended period.

“I suspect there are quite some years of hard repair work ahead for whomever is the government over the period ahead.”

Stevens also noted conditions would be more favourable if economic growth was stronger. “Growth is proceeding, it would be good if it was a bit stronger, but it’s not too bad.”

Stevens also defended the RBA’s system of inflation targeting, rejecting calls from some economists for a rethink of the system.

He said inflation targeting was “not a rigid thing that demands kneejerk reactions”, it was a system with sufficient flexibility to deliver what was required.

Stevens noted many approaches had been tried but the current system had worked and “you wouldn’t want to be without it”.

He also addressed the housing market, warning the bank was keeping a close watch on the leverage in the system.

The outgoing governor was also asked about China’s economic transformation. He noted Beijing was “trying to manage a profound epochal transition” and there was no textbook for how to do that, because no country had ever attempted the transformation that China was attempting on the scale it was attempting.

http://www.theguardian.com/australia-news/2016/may/24/reserve-bank-governor-glen...
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So, WE don't need to re-think OUR system, BUT the TEXTBOOK WON'T WORK for CHINA, so THEY MAY NEED TO RE-THINK???
WHAT A LOAD OF OLD COBBLERS!

The fact is WE (Globally) are now in NEW TERRITORY & have been for quite some time, BUT Politicians (ALL of them), Central Bankers (All of Them) & TPTB have largely BURIED THEIR HEADS IN THE SAND & HOPED that "SOMETHING" would come along, to solve these NEW PROBLEMS, for them, SO THAT THEY COULD CONTINUE WITH THE STATUS QUO, WHICH BENEFITS THEM!
That hasn't & won't happen and it is now a matter of Timing, for when the Proverbial hits the fan!!!

THEY will then plead IGNORANCE, which as usual, IS NOT THE WHOLE STORY!
THEY KNEW, BUT DID NOTHING, BECAUSE IT MEANT THEY GOT THEIR BENEFITS, FOR JUST A LITTLE LONGER!!!

AND, we allowed them to do it!
It's well past time, when WE need to SHOW THEM THE WAY, BY KICKING OUT EVERY INCUMBENT, UNTIL THEY FINALLY GET THE MESSAGE!

Major banks' profit growth to slow: Fitch

Australia's major banks face soft profit growth amid growing macroeconomic risks linked to low interest rates and government tax policy, according to Fitch.

The credit rating agency believes low interest rates and government tax policies have likely contributed to risks that include rising household debt and diminishing housing affordability related to strong house price growth.

It highlighted continued challenges for Commonwealth Bank, Westpac, National Australia Bank and ANZ from the downturn in the resources sector, which has already led to an increase in bad loans in WA and Queensland.

'Fitch expects soft profit growth in 2016, mainly reflecting asset competition, low interest rates, moderate credit growth and rising impairment charges,' Fitch said in a statement on Friday.

'Some portfolios, such as resources, are likely to continue experiencing asset-quality pressure due to weak commodity prices, which Fitch does not expect to improve in the short-term,' Fitch said.

Fitch said a hard landing for the Chinese economy could hit the big Australian banks, but that such a scenario is not its base case.

http://www.skynews.com.au/business/business/company/2016/05/28/major-banks--prof...
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In my opinion, the Credit Ratings companies are more part of the Problem, than part of the solution.

That said, there are a number of Global & Local issues, including those raised in this article, which means that the next 70 years, will be nothing like the last 70 years!

perceptions_now wrote on May 15^th, 2016 at 3:06pm:


Are you sure about that? Or were you unsuccessfully predicting an economic collapse in 2007 which you have retrospectively changed to a "downturn".

perceptions_now wrote on May 15^th, 2016 at 3:06pm:


I will now make a prediction of my own. on the 1/1/2018 when I remind you that your prediction was wrong, you will explain that events have delayed the collapse and you now confidently predict it will happen in 2018 & 2019.

Lets see if my prediction comes true........

The EIA has apparently stopped publishing its International Energy Statistics. Instead they are now publishing an abbreviated version on their Total Energy web page titled: Tabel 11.1b World Crude Oil Production. Here they publish crude + condensate production numbers for Persian Gulf Nations, Selected Non-OPEC Countries, Total Non-OPEC and World. The "Selected Non-OPEC Producers" are Canada, China, Egypt, Mexico, Norway, Russia, United Kingdom and the United States. They have just released their latest data through February 2016.

All the data below is in thousand barrels per day and through February 2016 unless otherwise noted.


They have world C+C peaking, so far, in November 2015 at 80,630,000 bpd. February production was 79,653,000 bpd or 977,000 bpd below the peak.


They have Non-OPEC peaking in March 2015 at 46,504,000 bpd and down by 925,000 bpd in February to 45,579,000 bpd.


They do not publish the OPEC C+C numbers but it is easy enough just to subtract the Non-OPEC data from the World data and get the data. OPEC C+C failed to breach its 2012 peak but did reach 34,562,000 bpd in July 2015, but by February 2016 it was down 488,000 bpd to 34,074,000 bpd.


China has peaked. The only question left to be answered is how fast will she decline?


Mexico managed to stem their decline for a few months but their production has begun to decline again.


Russia has been a real shocker. No one, inside or outside Russia, expected them to increase production by over 200,000 bpd over the last few months.


The USA is, of course a big part of what is happening to world oil production, and will continue to play a big part. I think US production will continue to decline for another year or so. After that? I think production will flatten out then increase slightly. But the boom times very expensive shale oil brought are over.


Iran is the main reason the price induced decline has not become obvious.

In conclusion: In spite of the recent increase in Russian production as well as the slight increase from the North Sea, in spite of the dramatic production increase from Iran due to the lifting of sanctions, world crude oil production is in decline.

But… the decline has only just begun. The price collapse caused the plateau in world oil production that began about March 2015. However, the decline did not actually begin until January 2016. The dramatic rise in production from Iran has kept the decline from becoming obvious to everyone. However, when the May production numbers come in, I think it will then become obvious to everyone.

http://seekingalpha.com/article/3978668-eia-world-crude-oil-production?ifp=0
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It all about Demand & Supply!
Demand has already started to come off the boil & Supply is in the process of doing the same!

There will no doubt, be UPS & DOWNS, in both Supply & Demand, But the Longer Term Trend, will finally show a DOWNTURN IN BOTH DEMAND FOR & THE SUPPLY OF, OIL and that will have ramifications, which will intermix with the other MAJOR ECONOMIC INFLUENCERS, including DEMOGRAPHICS, CLIMATE CHANGE & DEBT!!!

 

Oh & Btw, I wouldn't think it is co-incidental that the EIA has decided to stop publishing since 2014, in the previous format! 

Perceptions - Maybe companies have finally reduced their oil production as the prices have been so low they are losing serious cash.

We have had an oil glut for over 5 years.
Oil producing coys have nowhere to store excess supplies.