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Demographic Change

Home Demographic Change

The modern global economy came into being over the last 250 years at the same time as a huge explosion of people on the planet. This is not mere coincidence; the modern economy and population growth are inextricably linked, as enablers, beneficiaries, and possibly victims of the other. After a long period of growth, two trends are evident in the twenty-first century. First, the total population is still growing, with more people added to the planet every year. Second, population growth is slowing with the total population thought to be leveling off later in the century.

A larger population means more demand for products, jobs, benefits, resources, and public and environmental goods. Slowing population growth means fewer workers with an increased average age. The latter leads almost invariably to a lower percentage of taxpaying workers to benefit-receiving retirees, or an increased dependency ratio. Most economies have obligations to their retirees regardless of how many there are. There are risks and opportunities in both subtrends: growth and slowing growth.

The full summaries include background, likelihood, and contributing and mitigating factors.

Scenario Summaries

Scenario 1A1: Revival of food security concerns in emerging markets disrupts global agricultural trade markets

Considerations

  • Long term out of the money options on food products, marginal farmland, and non-nitrogen fertilizers
  • Investment in storage and preservation facilities and technologies
  • Monitor trends in commodity ring fencing and supply responses in concentrated markets

Scenario 1A2: Increased commodity price volatility in selected markets

  • Monitor commodity market liquidity and market diversity
  • Take out of the money calls on commodities w. low supply elasticity
  • Monitor substitution, technology, and changing demand drivers

Scenario 1A3:  Non-substitutable resource/asset price inflation (temperate property, fine art, urban property)

  • Seek out lower demand substitutes, i.e. lower cost temperate climate property
  • Monitor second tier markets and shocks to first tier markets, i.e. London real estate post Brexit or CA post earthquake

Scenario 1B1: Demography driven changes in flows in, compositions of, and pricing in asset markets

  • Develop demographic stock and flow model based on early evidence of age driven investment behavior
  • Long-term, out of the money options on likely affected asset markets, especially puts
  • Monitor “new money” that counters age driven demand changes

Scenario 1B2: Increased public health and retirement spending

  • Medium-term growth in key areas, before burden become unsustainable: care, devices, supplemental insurance
  • Bets against providers of government discretionary goods
  • Long-term bets against most affected economies, Japan and EU

1 Comment

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  • wolandadmin
    · Reply

    Author
    September 14, 2017 at 4:18 PM

    test 2

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