My friend Ken always sends me super-interesting reading material that isn’t necessarily in my regular wheelhouse. He works in the investment business as well and we share a similar belief that understanding demography holds the key to making longer-term investment decisions. Yes, it’s paradoxical that people can know a lot more about 10 years from now than they can about tomorrow, but using demographic realities there are some ways in which you almost can.
Anyway, Ken put this amazing article in front of me about the Gray Tsunami and the demographic state of the developed world. One of the most fascinating areas to think about is Sun City, Arizona – a retirement town staffed with young Latin American immigrants and populated almost entirely byaging Midwestern whites…
From Discover Magazine:
The Phoenix sprawl foreshadows the fractured demography to come. Although Phoenix and the state at large are 30 percent Hispanic, that proportion drops to 0.9 percent inside the walls of Sun City and other Arizona retirement enclaves—where residents tend to be white, often from the Midwest. Eight of 10 Arizonans who are 65 and older are white, and their numbers are expected to double in 10 years. Meanwhile, 60 percent of the state’s Hispanic residents are younger than 24. Already the majority of elementary schoolchildren are Hispanic. By 2030 half the state’s residents will be either under the age of 18 or over 65, an unprecedented gulf dividing groups by both age and ethnicity. It would be hard to concoct a better recipe for social heartburn.
There’s a lot going on in this piece, including the fact that women aren’t having enough babies (or starting early enough) and that this trend happens in all developing countries, regardless of race, religion or availability of birth control. Part of this has to do with gentrification and part is due to the liberalization of worldwide attitudes concerning the education of women. When you combine these slowing birth rates with the fact that people at the upper end of the age scale are living longer, you get some pretty untenable situations all over the world. Japan is an extreme example only insofar as it has already been in progress for so long.
What you should be thinking about as you read this is the ways in which this will affect the markets. What investment theses can we start thinking about as longer-term answers to this puzzle? Health care? Pharmaceuticals and biotechs? Retirement community REITs and hospital REITs? Insurance and health management? Healthy living and fitness? Healthy eating trends?
There are so many ways to play this inevitability, despite the grim inexorability of it all.