Population and the market.
I'm sick and going to lie down shortly here, but I just saw a post titled "1 in 5 communities vulnerable to population loss." It is a Canadian story, but what interested me about the story isn't where, but more the effects of population on the markets.
We have recently learned that some "truths" are not truths, such as "real estate always goes up," or "real estate is always a good investment."
There is another "truth" that I've left hints around, or statements to the effect, "let's talk about this in 10 years" kind of thing because I don't believe it to be a truth and I have figured it is senseless to try and put the point across in a world where going against common "truths" often leaves you discredited.
The "truth" that I see frequently cited that I don't think will stand the test of time is that "the stock market always goes up" and it out performs all other investments. Its defenders cite hundreds of years of data. I think this has been a truth because of the continuous exponential growth in population over the past 500 years, but now population growth is showing enormous stress.
I don't think economic models take a lot of consideration for population, and there are few examples where population has actually declined. I believe Japan is an example where population has declined, and they are also one of the few examples of an economy that experienced deflation after a financial crisis is the 90s. The Latin American countries with their enormous population growth experience enormous inflation with their financial crisis in the 80s.
The article points that economic conditions seem to be a determinant in whether there will be population growth in a region, no jobs and people tend to leave.
So, there are two population themes here, one about world population and the other about how population moves due to the economy. I think the increases in world population have been an under recognized factor in the stock market out performing all other asset classes, and the stress on world population growth will start to change perceptions on the stock market long term. I may still be early with this assessment, but the current food riots around the world make me think the projections of 10 billion people on this planet are questionable.
There are arguments that raising the standard of living for the mass population will be where growth comes from, but I tend to think that puts further stresses on population because of limited resources like water. Raising standards of living dramatically increases water use and already many countries have serious water access problems. I can't see standards of living going up as much as people expect simply because of water.
If you didn't read my last post, give it a look...