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Welcome to Demographics School

Welcome to Demographics School. presented by Rodney Johnson President, HS Dent. HS Dent. Independent Economic Research Company Forecast economic change based on three key tools: 1. Demographics and demographic trends 2. Predictable consumer spending patterns, and

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Welcome to Demographics School

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  1. Welcome to Demographics School presented by Rodney Johnson President, HS Dent

  2. HS Dent Independent Economic Research Company Forecast economic change based on three key tools: 1. Demographics and demographic trends 2. Predictable consumer spending patterns, and 3. Technological innovation acceptance rates

  3. Forecasting Doesn’t Always Work Out I think there is a world market for maybe five computers. - Thomas J. Watson, 1943, Chairman of the Board of IBM We don't like their sound, and guitar music is on the way out. - Decca Recording Co. rejecting the Beatles, 1962 With over 50 foreign cars already on sale here, the Japanese auto industry isn't likely to carve out a big slice of the U.S. market. -Business Week, 1958

  4. Especially In Finance We’re looking for home sales to turn upward before mid-2008, on a national average basis, and we expect recoveries in housing starts and construction spending to commence before the end of the year. The Longer-Term Housing Outlook Is Excellent! David F. Seiders, NAHB Chief Economist, 1/9/08 Stocks reached a “selling climax” on July 15 (2008), which will be seen as the bottom for the current market.”BusinessWeek, August 2008 Jeremy Siegel — the famous Wharton School professor

  5. What You Will Learn Background of economics The sources of our research The statistics involved (good and bad) What the Average American looks like Three main tools of HS Dent research – demographics, predictable spending patterns, technology innovation and acceptance What lies ahead

  6. What You Will Be Able To Do Describe how modern, industrialized economies work See the next economic “season” Estimate changes to businesses, investors, and even countries Highlight the opportunities and risks in the next 3, 5,10 and 20 years

  7. Economics Malthusian Economics Classical Economics Keynesian Economics Austrian School

  8. Malthusian Economics Scarcity Current technology Population (crowd-out)

  9. Classical Economics Input of Labor All inputs are incremental Always moving toward full employment by shifting inputs to where needed

  10. Keynesian Circle

  11. Keynes’ Animal Spirits The colorful name that Keynes gave to one of the essential ingredients of economic prosperity: confidence. According to Keynes, animal spirits are a particular sort of confidence, "naive optimism". He meant this in the sense that, for entrepreneurs in particular, "the thought of ultimate loss which often overtakes pioneers, as experience undoubtedly tells us and them, is put aside as a healthy man puts aside the expectation of death". Where these animal spirits come from is something of a mystery. Certainly, attempts by politicians and others to talk up confidence by making optimistic noises about economic prospects have rarely done much good. Economist.com

  12. Basics of Hayek(Austrian School) Free markets allow best allocation of resources Government intervention (interest rates and other monetary policy ) causes mal-investment Those mal-investments must be worked out of system over time It is the BOOM that should scare you!

  13. Hayekian Triangle Mises Institute

  14. VideoFear the Boom and Bust

  15. The Federal Reserve

  16. Why Does the Fed Exist? Response to bank panic of 1908 End regional currencies Stop runs on banks

  17. Amended Monetary Act 1913 …the Fed "shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." • www.federalreserve.gov • www.federalreserve.gov/kids

  18. Target Fed Funds Rate January 2003 – June 2013 Fed Funds Rate Percentage Source: Federal Reserve

  19. 30-Year, 10-Year, and Fed FundsJanuary 1988 - September 2011 Data Source: Federal Reserve, 2011

  20. Federal Reserve Balance Sheet1997 Projected through 2011 Source: Federal Reserve, 2011

  21. VIDEOChris Martenson, Crash CourseMoney Supply & The Fed

  22. What About Gold? Held to $20.67/oz. from 1860s through 1933 Moved to $35/oz. under Roosevelt Remained until 1971 when Nixon closed the Gold Window

  23. Gold, Average Annual Price1900- August 2011 Data Source: Bloomberg, 2011

  24. Why Gold Will Not Become Currency Everyone would have to adopt at same time or risk ruinous rise (see Swiss) Removal of lever for adjusting business cycle (prices versus currency value) Loss of control on the part of government

  25. BREAK

  26. www.dilbert.com

  27. Demographics

  28. Strong Uptrends and Downtrendsin Births

  29. Average Immigrants per Year by Age 1945-2000 Source: US Census Bureau

  30. The Immigration Adjusted Birth Index Immigration Adjusted Births

  31. Demographics How many people born in each year The numerical effect of immigration Composition of US population by age groups Where the information comes from (NCHS, Census) Websites of interest: www.cdc.gov/nchs/www.census.gov

  32. Predictable Spending Patterns

  33. Average Annual Family Spending by Age (5-year age groups) 46-50 Spending Age

  34. Change in Spending at each Age & Stage of Life 46-50 Family, College Kids 22-30 Young Married 31-42 Young Family 50+ Empty Nesters 18-22 Single 60+ Retired

  35. Boomers Are Not Different! Front end of Boomer generation began retiring in 2003 Wave continues through 2025 Spending STILL PEAKS approx. age 48-50

  36. The Adult Life Cycle Education (college, trade school, etc.) Workforce Apartments Marriage Children Home purchase Second home purchase Children leave Pay down debts Save for retirement Vacation property Retirement property

  37. Only Works for Some Economies must be Industrialized Modernized Democratized in terms of consumers holding funds

  38. Who Spends What in the Economy 2010 Source: U.S. Department of Commerce, Bureau of Economic Analysis

  39. Who Spends What in the Economy 2002-2010 Source: U.S. Department of Commerce, Bureau of Economic Analysis

  40. Composition of U.S. Gross Domestic Product 1929-2010 Source: Bureau of Economic Analysis

  41. Who Spends What in the Economy 2010 Source: Bureau of Economic Analysis, HS Dent Research

  42. Share of GDP, Accounting for Government Social Programs and Financial Recoveries Source: BEA, OMB, HS Dent Research

  43. Percent of Personal Income Contributed by Government Programs Source: BEA, HS Dent Research

  44. Total Government Transfer Payments 2002-2010 Billions of dollars Source: BEA, HS Dent Research

  45. Real Personal Consumption ExpendituresJanuary 1995 - July 2011 Data Source: Bureau of Economic Analysis, 2011

  46. Real Personal Consumption ExpendituresJanuary 1995 – July 2011 Missing Growth Data Source: Bureau of Economic Analysis, 2011

  47. Composition of U.S. Personal Consumption Expenditures Data Source: Bureau of Economic Analysis, 2011

  48. This Is What You See

  49. Potato Chip Purchases by Age $ Per Year Age of Head of Household 42

  50. Motorcycle Sales by Age 45-49 $ Per Year Age of Head of Household

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