I hate to say it, but as you are reading this blog you have aged. Don’t bail out, what I have to share with you will at least give you some financial security as you cultivate that grey hair.
Wednesday I wrote a blog about demographics being the big dog that wags the stock market tail. Invest a few moments of your life and read this post first, it will make more sense, I hope. Don’t shoot the messenger!
http://franchisewhale.com/2008/04/demographics-and-stock-market.html
Last November I wrote a post that talked about the recession was baked into the 2008 pie because of a very accurate indicator that screamed contraction the day before Thanksgiving 2007. Doh! Darn economic tryptophan!
http://franchisewhale.com/2007/11/thanksgiving-surprise-locks-in.html
Those stories are background to this main point. Just like everything else in nature, people, groups and even countries, all go through growth and decay cycles. As an entrepreneur, our job is to help people live better through the growth a decay cycles and make money in the process. Let’s first look at the major growth markets and then we can drill down to the industries.
Young people take more risk than old people.
Insurance companies know this too well. I live in Arizona and trust me, the dinner-before-5-bunch do not drive any better than the High School musical crowd. The elderly have a better grip on their own sense of mortality however. I know this for a fact, at 40 years old I found myself bouncing down the road at 50 miles an hour with no helmet! At that exact moment in time, I realized, “This is really going to hurt!” Time literally stopped and 138 feet later of an epidermis laden skid mark, I realized, I was mortal.
Most people are much wiser than myself and discover that obvious jewel of mortality wisdom earlier than I did. At some point we all realize it. That realization makes us more cautious, more risk adverse and more conservative in our financial affairs. When you have a country full of people that realize they are getting older at the same time, the economy will also “slow down.”
We are almost at the peak of a very tall spending hill. 2010, we will start down the hill and will spend less each year for the next decade in America. What breadcrumbs can we follow to put together our Macro hotlist of countries that will keep spending and growing while we are getting older and more conservative?
- What is the average age of the country we are interested in?
- If I find a real young country, do the political and economic systems support growth? (Afghanistan is full of youngsters but would be a nightmare investment environment.)
- As countries urbanize, they have fewer children.
- Fewer children, fewer spenders, slower growth (Think Europe and Japan).
The geography box score looking ahead:
- Slower and declining growth: Europe, America, Canada and Japan.
- Fast growth: Latin America, South East Asia and the Middle East.
- The Mother of all growth markets: India.
I know some of those seem counter intuitive. How can China actually be in the moderating growth column? Two big reasons. The “one child” policy put a kink in the Chinese birth canal. In 2015 their version of the Baby Boomers will enter their peak spending cycle top. They will also be nursing a slowdown as their biggest export market, America continues to spend less. Double Wammy!
What about India? They are packed with youngsters, a very bureaucratic but democratic system none the less. Combine that with a massive birth rate, huge human capital pool and pro business planners. They will not peak in their spending until 2065! Also they have avoided the mistakes the social planning meat heads made behind the rice curtain. The Chinese do not have a corner on the market of dumb growth policies. Japan and Germany have very rigid immigration laws and the USA is moving in the wrong direction building a wall when it should be opening an express freeway for bright, honest foreigners. Check out the birth and immigration trends in Japan and you will see why the Nikkei average peaked December 29, 1989 at 38,916. Today the average is at 13,342. Still down 65% after 14 years! The US stock market declining from 2010 to 2023 is impossible! Think again.
When God gave the commandment in the garden, “Be fruitful and multiply and replenish the earth”, it was the biggest stock tip in the history of the world! If you produce fewer consumers than yourself, you are digging an economic grave for yourself.
A brilliant move the Indian planners made was to skip the industrial phase and jump right to services. It took the USA about 100 to ramp up and take the manufacturing power away from Europe. China took that away from us in about 30 years. India realized, why fight over declining margins and try and compete with a bigger labor force. The planners jumped straight to the services and information phase. Do you ever see your kid’s toys or your clothes labeled “made in India?” When was the last time you had someone in tech support or a call center help you from India? If you told a guy in the 1950's that they would one day pay someone else to change their oil in their car, do their yard work and repair their dishwasher, he would have thrown your pansy candy butt out of his yard! Things change. Change is the only guaranteed certainty in the future.
Africa is a real wild card. That could be a very interesting market for the brave at heart but too much to analyze in this story and much lower hanging fruit around the world to consider first.
I know, Harris, easy boy, I am not that adventurous and want to make money in the USA. OK, you just need to figure out where people will still spend money as it grows grey and get there before they do. Next week I will be interviewing some CEO’s that will open your mind to the accelerating franchise boom providing services to the elderly.
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