The Future is Made in the Bedroom, Not the Boardroom

RIP Hans Rosling

Hans Rosling was, if you’re a data geek like me, a hero. His life was spent not just combating fake facts and opinion based decision making but also in finding new and imaginative ways of visualising real data. And he was in demand by corporations across the world because his work showed them where to invest.

So obviously Rosling wasn’t an economist: he was a population statistician who built his ideas on data, rather than models. And what his data suggests is that the future is made in the bedroom, not the boardroom.

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Be Kind To An Old Person – Start With Yourself

No One Will Care When You’re Old

Around the globe governments  struggling with budget deficits have been making sure that they target the true villains of the financial crisis. Admittedly, it's slightly surprising that treasury ministers seem to have decided that their money problems weren’t caused by errant and badly incentivised bankers but by old age pensioners rushing about terrorising people with their zimmer frames and incontinence bags.

The evidence is clear – low interest rates and high underlying rates of inflation disadvantage people who aren’t in paid employment, while the increasing focus on raising state pension ages and restricting government health spending clearly impacts old people more than young. This is all a bit odd, you might think, but is perfectly rational from the perspective of politicians. Something for the young to remember – no one will care when you get old, so you'd better start thinking of your future self, whoever they are.

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A Yen For Yield

Retirement Nirvana Postponed

As countries have squashed their interest rates down over the past few years it's had the nasty consequence for millions of people approaching retirement of pushing back that nirvana of non-working bliss ever further into the future. By attempting to stimulate economies, by turning the lenders of last resort in free money machines, annuity rates – the interest received on retirement pots – have fallen, often quite dramatically.

When this happened in Japan the net effect was an extraordinary quest for a higher income in the most unlikely of places. Now, as the irrestistable force of the Boomer population moves inexorably into its retirement and is faced with the unmoveable object of yields on their investments that wouldn’t feed and clothe an anorexic sparrow on a crash diet, we’re likely to see yet another set of equally unintended consequences. If you want a trend to follow then don't bother with gold: look for yield.

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Tâtonnement: Groping for Stock Equilibrium

Old Saws, New Rocks

One of the oldest saws in the book of economics is the idea of supply and demand; it even pre-dates Adam Smith, with a legacy stretching back to Muslim thinkers of the eleventh century. If people demand the Pet Rock as the next must-have toy but supply is limited then prices of Pet Rocks will go up. If some enterprising rock counterfeiter then floods the market with a supply of good-enough fakes then the demand is likely to fall, and price with it.

This iron rule of economics is actually a bit less rigid than you might think. In fact, it’s rather too wibbly-wobbly to describe it as a rule at all. But at the margins it more or less works which means it’s rather curious that it’s rarely cited as a reason for long-term changes in stock prices. It stands to reason, though, that if lots of people decide they want to buy shares just as companies start to withdraw them from the market that prices should go down. Or does it?

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Looking for a Demographic Dividend

Listen to the Non-Economists

A few years ago that noted economist P. J. O’ Rourke opined that deciding whether to buy stocks or not was easy. He pointed out:

“We baby boomers have caused everything since 1946. We’ll keep buyings stocks until we retire. But when we hit sixty-five, we’re going to sell stocks. And the stock market is going to go down. And we’re going to wet ourselves.” (Eat the Rich)

As usual, PJOR was more right than the real economists, whoever they are.

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