Monday, December 7, 2015

"How much do demographics really matter?"

Demographics are easy. Figuring out bets based on demographics is hard.
Europe is especially interesting, we've mentioned the short Sweden/long Poland or Czechia pair trade a couple times.

From FT Alphaville:
Expected changes in the number of people of different ages is a hot topic these days. 
Over Thanksgiving week, the Wall Street Journal ran a big series on it, as well as a thoughtful column on what these changes might mean for the economy and asset prices. HSBC just came out with an 80-plus page report on the subject. Toby Nangleand Charles Goodhart are among the most high-profile analysts who believe demographic changes will reduce inequality and reverse the secular downtrend in real interest rates. 
Acknowledging population shifts is better than not — we’ve previously noted Japan’spost-bubble experience looks quite different when you bother to consider what’s happened to the number of Japanese people since 1990, for example — but it’s possible some of the recent demographics-derived predictions of interest rates and labour bargaining power may be overdone. 
According to the UN’s population division, the number of people aged 15-64 in the “high-income countries” has probably peaked and is expected to gradually shrink about 7 per cent over the next half-century, while the number of people aged 65 and up is expected to grow by 80 per cent. (The under-15 population is expected to stay essentially the same size.) 
In China, the expected changes will be even more dramatic. There, the working-age population is expected to collapse by a third by 2065 while the elderly population more than triples, from 131 million now to roughly 406 million in five decades.