California
by
Adam Taggart
by
Adam Taggart
by
Gregor Macdonald
Executive Summary
- Fertility rates are experiencing a "natural decrease" at record levels across the U.S.
- Poverty rates are rising across the country, despite the "recovering" economy
- What exactly is "powering" U.S. economic growth? Perhaps much less than realized.
- Why we are likely in the calm before the storm when corporate profits peak right before an economic downturn
- The 3 most likely scenarios for the stock market from here
If you have not yet read Part I: Marking the 4-Year Reflationary Rally: How Much Better Off Are We Really?, available free to all readers, please click here to read it first.
One of the challenges the U.S. stock market will increasingly face in the years ahead is continued growth in the Dependency Ratio. The U.S. Census Bureau alerted us to this trend back in 2010. For keen observers of demographics, this couldn’t have been a surprise). The rate at which the Dependency Ratio is growing, and is set to grow further, is accelerating:
The U.S. Census Bureau reported today that the dependency ratio, or the number of people 65 and older to every 100 people of traditional working ages, is projected to climb rapidly from 22 in 2010 to 35 in 2030. This time period coincides with the time when baby boomers are moving into the 65 and older age category…The expected steep rise in the dependency ratio over the next two decades reflects the projected proportion of people 65 and older climbing from 13 percent to 19 percent of the total population over the period, with the percentage in the 20 to 64 age range falling from 60 percent to 55 percent…“This rapid growth of the older population may present challenges in the next two decades,” said Victoria Velkoff, assistant chief for estimates and projections for the Census Bureau's Population Division. “It's also noteworthy that those 85 and older — who often require additional caregiving and support — would increase from about 14 percent of the older population today to 21 percent in 2050.”
This is precisely one of the key, ongoing headwinds that faced Japan's stock market for 20 years. When Japan's economy moved steadily into its low-growth phase, unable to generate sufficient jobs, fertility rates and household formation declined rapidly. As I explained in The Arrival of Japan's Sunset, these will not be cured by the current devaluation of the yen, despite naïve cheerleading. And neither will they be solved here in the U.S.
But in contrast to Japan, the United States is only just embarking on its slow growth phase. Its demographically challenged culture and economy will reinforce each other as we move ahead in time. And, it's not just the retiring class of workers that will massively increase the Dependency Ratio in the U.S. in years ahead…
Why This Recovery Is Coming to an End
PREVIEW by Gregor MacdonaldExecutive Summary
- Fertility rates are experiencing a "natural decrease" at record levels across the U.S.
- Poverty rates are rising across the country, despite the "recovering" economy
- What exactly is "powering" U.S. economic growth? Perhaps much less than realized.
- Why we are likely in the calm before the storm when corporate profits peak right before an economic downturn
- The 3 most likely scenarios for the stock market from here
If you have not yet read Part I: Marking the 4-Year Reflationary Rally: How Much Better Off Are We Really?, available free to all readers, please click here to read it first.
One of the challenges the U.S. stock market will increasingly face in the years ahead is continued growth in the Dependency Ratio. The U.S. Census Bureau alerted us to this trend back in 2010. For keen observers of demographics, this couldn’t have been a surprise). The rate at which the Dependency Ratio is growing, and is set to grow further, is accelerating:
The U.S. Census Bureau reported today that the dependency ratio, or the number of people 65 and older to every 100 people of traditional working ages, is projected to climb rapidly from 22 in 2010 to 35 in 2030. This time period coincides with the time when baby boomers are moving into the 65 and older age category…The expected steep rise in the dependency ratio over the next two decades reflects the projected proportion of people 65 and older climbing from 13 percent to 19 percent of the total population over the period, with the percentage in the 20 to 64 age range falling from 60 percent to 55 percent…“This rapid growth of the older population may present challenges in the next two decades,” said Victoria Velkoff, assistant chief for estimates and projections for the Census Bureau's Population Division. “It's also noteworthy that those 85 and older — who often require additional caregiving and support — would increase from about 14 percent of the older population today to 21 percent in 2050.”
This is precisely one of the key, ongoing headwinds that faced Japan's stock market for 20 years. When Japan's economy moved steadily into its low-growth phase, unable to generate sufficient jobs, fertility rates and household formation declined rapidly. As I explained in The Arrival of Japan's Sunset, these will not be cured by the current devaluation of the yen, despite naïve cheerleading. And neither will they be solved here in the U.S.
But in contrast to Japan, the United States is only just embarking on its slow growth phase. Its demographically challenged culture and economy will reinforce each other as we move ahead in time. And, it's not just the retiring class of workers that will massively increase the Dependency Ratio in the U.S. in years ahead…
by
Adam Taggart
by
Adam Taggart
by
Gregor Macdonald
Executive Summary
- Escalating energy costs (direct and indirect) create a vicious cycle in the economy that further hinders growth/recovery
- Overspending and other poor capital allocation decisions by state governments are compounding the problem
- California spends $1 on public transit vs. $10 on automobile-related investment, a gap that energy costs will soon painfully reverse
- Solutions are hard to come by and harder to fund, but without investment, alternative systems won't ever achieve scale
- California's future is increasingly easy to predict; individuals and other state governments better take notes or suffer the same fate
If you have not yet read Part I: Dawn of the Great California Energy Crash, available free to all readers, please click here to read it first.
A key feature in the post-war industrial success of countries like South Korea and Japan, given that they had virtually no domestic energy supplies, was the ability to turn a profit from manufacturing powered by imported energy. This favorable equation relied on three key factors:
- That imported energy remained a cheap input cost compared to the high margin value of exported goods
- That energy producing countries had cheap energy to export
- That purchasers of the exported goods were growing, and were running their own economies on cheap energy
These are the exact same assumptions still being made — and extrapolated into infinity — about California's economy.
Are we really to believe that California's GDP can forever deindustrialize, requiring fewer and fewer energy inputs, while growing in profitability, thus providing the capital to access/import energy — at any price?
California: The Bellwether for the Rest of America
PREVIEW by Gregor MacdonaldExecutive Summary
- Escalating energy costs (direct and indirect) create a vicious cycle in the economy that further hinders growth/recovery
- Overspending and other poor capital allocation decisions by state governments are compounding the problem
- California spends $1 on public transit vs. $10 on automobile-related investment, a gap that energy costs will soon painfully reverse
- Solutions are hard to come by and harder to fund, but without investment, alternative systems won't ever achieve scale
- California's future is increasingly easy to predict; individuals and other state governments better take notes or suffer the same fate
If you have not yet read Part I: Dawn of the Great California Energy Crash, available free to all readers, please click here to read it first.
A key feature in the post-war industrial success of countries like South Korea and Japan, given that they had virtually no domestic energy supplies, was the ability to turn a profit from manufacturing powered by imported energy. This favorable equation relied on three key factors:
- That imported energy remained a cheap input cost compared to the high margin value of exported goods
- That energy producing countries had cheap energy to export
- That purchasers of the exported goods were growing, and were running their own economies on cheap energy
These are the exact same assumptions still being made — and extrapolated into infinity — about California's economy.
Are we really to believe that California's GDP can forever deindustrialize, requiring fewer and fewer energy inputs, while growing in profitability, thus providing the capital to access/import energy — at any price?
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