Jonathan Clements on demographics and investing

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Kevin K
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Jonathan Clements on demographics and investing

Post by Kevin K » Sun Jun 03, 2018 2:20 pm

I know there are many Clements fans here and thought his discussion of relative age and projected productivity in the developed world vs. emerging markets in his new newsletter was typically clear and concise.

Towards the end of the post there are links to a paper and data as well as a six-minute video presentation all by Rob Arnott. None of this inspires me to go wild overweighting emerging market stocks or TIPS, but I do think it makes a pretty compelling case for broad international diversification.

http://www.humbledollar.com/2018/06/getting-up-there-2/

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nedsaid
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Re: Jonathan Clements on demographics and investing

Post by nedsaid » Sun Jun 03, 2018 6:19 pm

I have been harping on this for years, not my idea originally but picked up from Warren Mosler. Pretty much, the way of solving the "retirement crisis" is with a vigorous economy that can produce enough goods and services for everyone. That means you need enough workers in the economy to produce all of that. It is a demographic issue and not a financial issue. If we all saved diligently for retirement and were retirement millionaires, all that would do is push up the prices of everything and we would all be in the same relative position. What society has to do is determine how much of the economy to dedicate to our seniors.
A fool and his money are good for business.

Dottie57
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Re: Jonathan Clements on demographics and investing

Post by Dottie57 » Sun Jun 03, 2018 6:54 pm

nedsaid wrote:
Sun Jun 03, 2018 6:19 pm
I have been harping on this for years, not my idea originally but picked up from Warren Mosler. Pretty much, the way of solving the "retirement crisis" is with a vigorous economy that can produce enough goods and services for everyone. That means you need enough workers in the economy to produce all of that. It is a demographic issue and not a financial issue. If we all saved diligently for retirement and were retirement millionaires, all that would do is push up the prices of everything and we would all be in the same relative position. What society has to do is determine how much of the economy to dedicate to our seniors.

I hope to get something from SS. IF I can get half my projected amount, I should be ok.

But what do you honk should happen to those who haven’t saved.

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nedsaid
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Re: Jonathan Clements on demographics and investing

Post by nedsaid » Sun Jun 03, 2018 7:17 pm

Dottie57 wrote:
Sun Jun 03, 2018 6:54 pm
nedsaid wrote:
Sun Jun 03, 2018 6:19 pm
I have been harping on this for years, not my idea originally but picked up from Warren Mosler. Pretty much, the way of solving the "retirement crisis" is with a vigorous economy that can produce enough goods and services for everyone. That means you need enough workers in the economy to produce all of that. It is a demographic issue and not a financial issue. If we all saved diligently for retirement and were retirement millionaires, all that would do is push up the prices of everything and we would all be in the same relative position. What society has to do is determine how much of the economy to dedicate to our seniors.

I hope to get something from SS. IF I can get half my projected amount, I should be ok.

But what do you honk should happen to those who haven’t saved.
Individuals can save their way out of this problem given sufficient income but society as a whole cannot. Declining worker to retiree ratios make funding entitlement programs more and more difficult. Pretty much, we need more kids.
A fool and his money are good for business.

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Re: Jonathan Clements on demographics and investing

Post by LadyGeek » Sun Jun 03, 2018 8:19 pm

This thread has run its course and is locked (not actionable). See: Non-actionable (Trolling) Topics
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Re: Jonathan Clements on demographics and investing

Post by LadyGeek » Mon Jun 04, 2018 3:48 pm

I removed some off-topic posts. After receiving a PM, this thread is now unlocked to continue the discussion.

Please stay focused on the investing aspects as it applies to a personal investor.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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Peter Foley
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Re: Jonathan Clements on demographics and investing

Post by Peter Foley » Mon Jun 04, 2018 4:50 pm

20 - 25 years ago a question I asked a number of economists and demographers (different groups mind you) was their opinion regarding the US stock market when the Baby Boomers started to retire. Would it crash when the early boomers like myself started to pull money out of the market to live on? Both had the same opinion - that the demographics of the US were not the same as the world's demographics and that other countries were sure to advance economically and invest at home and in the US. This has been generally true and speaks to the importance of owning some foreign stocks and/or bonds.

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zaboomafoozarg
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Re: Jonathan Clements on demographics and investing

Post by zaboomafoozarg » Mon Jun 04, 2018 5:47 pm

Maybe increased automation will make up for the declining population, and we won't see as big of a decline in returns as I'm thinking.

But if not, the only possible ways I can think of to prepare for this are:

1. plan for lower returns
2. allocate more to markets that are still growing

Turbo29
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Re: Jonathan Clements on demographics and investing

Post by Turbo29 » Mon Jun 04, 2018 6:35 pm

Reminds me of this from about 15 or so years ago:
Imagine, if you will, a desert island on which there are only five inhabitants—four workers and one older retired person. Each of the four workers does several odd jobs: growing various foodstuffs, building shelter, providing rudimentary medical care, and the like. The medium of exchange is coconuts. Every month, each of the four workers gives a few of his coconuts to the retiree.

One day, one of the remaining four workers turns sixty-five and decides that he, too, wishes to retire. If he does so, instead of each worker supporting 0.25 retirees, each would be supporting 0.67 retirees. Not only that, but the total GDP of the island would fall by 25%; so would per capita GDP. What do you suppose the response of the remaining three workers will be to an apparently healthy-looking colleague who demands that they support his idleness?

Let us further assume that the candidate-retiree has planned for his nonproductive years by accumulating a disproportionate number of the coconuts. In doing so, he has done nothing to increase the productivity of the island. Now that he must spend the coconuts, the island will find an increased number of them chasing 25% less goods and services. The result is a predictable bear market in coconuts and dramatically more expensive goods and services.

Worse yet, to the extent that he has planned ahead and saved, he sows social discord, for even if he himself has accumulated enough coconuts to counteract the effects of higher prices, he has raised prices for everyone else in the process.
...
If you want to retire early, what matters is not how much you save, but how much more than everyone else you save. In a world where everyone saves as if they’re going to retire at fifty-five, or even at sixty-five, none can.
http://www.efficientfrontier.com/ef/103/hell4.htm

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