The Great Depression Ahead by Harry S. Dent JR

Author:Harry S. Dent, JR.
Language: eng
Format: epub
Publisher: Simon and Schuster
Published: 2009-01-05T16:00:00+00:00

The Spending Wave on a New Global Perspective

The Spending Wave is our simplest and most powerful forecasting tool, as discussed in Chapter 2 (Figure 2.3). We simply move forward the number of births (adjusted for immigration) in a developed country like the United States for the quantifiable peak in spending (at the age of 46 to 50 today) of the average household and the correlation with the economy and the stock market long term is remarkable.

When we apply the Spending Wave to countries other than the United States, it is important to note that while it is still effective for estimating economic growth, it might not be quite as effective at estimating changes in financial markets in those countries as it is in the broader and more self-sufficient U.S. economy.

Although many of them maintain and are rapidly expanding global operations, U.S. companies are still overwhelmingly geared toward selling to the American consumer, just as Japanese companies were despite the more highly visible export companies. Furthermore, the sheer size of this market means that more everyday American companies often have ample room to grow within the country’s borders and have no compelling need to expand abroad. It is therefore not particularly surprising that demographics—which drive consumer patterns—can accurately forecast stock market trends. In many of the more developed countries in Europe and in Asia, such as the Netherlands and Singapore, respectively, there isn’t always as close a correlation between the Spending Wave and the stock market as there is in the United States, as the companies in these smaller markets cannot depend as much on domestic consumption and must depend instead on exports. Many also have government policies in place that actively encourage exports. Countries with higher governmental direction and/or with international trade flows of 20% or more of GDP will be influenced by global factors rather than by purely domestic demographic patterns.

The United States and Japan have collected annual birth data over most of the last century, but many countries don’t readily provide data at that level of detail or history. Luckily, the United Nations does provide past and future projections of age distributions in five-year cohorts for all major countries around the world, which give us a comparable standard to use for demographic projections worldwide. Birthrates are now declining in all major regions of the world—on a predictable downward slope—although such rates are still much higher in areas like South Asia, the Middle East, and Africa (Figure 6.1). Life expectancy is increasing in a predictable upward slope similarly, with the exception of a very small number of countries like Russia. This allows the UN to project population and age distributions many decades ahead in all countries and for the world as a whole with a pretty high degree of reliability.

Figure 6.2 shows the world population projections out to 2100, with a projected peak in 2065 and a gradual slowing thereafter. The peaking and mild decline around 2065 may look relatively harmless, but that is deceptive. If this slowing occurs

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