2)Now look at the world’s worst population pyramid, that for Japan. These graphs show that a nearly perfect pyramid drove a miracle stock market during the fifties and sixties which I remember well, when Japan had your model high growth emerging market economy. That changed dramatically when the population started to age rapidly during the nineties. The 2007 graph is shouting at you not to go near the Land of the Rising Sun, and the 2050 projection tells you why. By then, a small young population of consumers with a very low birth rate will be supporting the backbreaking burden of a huge population of old age pensioners. Every two wage earners will be supporting one retiree. Think low GDP growth, huge government borrowing, deflation, and a terrible stock and housing markets. Dodge the bullet.
3) Where does the US stand in all of this? Brace yourself. It shows that we are turning into Japan. As a silver tsunami of 80 million baby boomers retires, they will be followed by only 65 million from generation “X”. The intractable problems that unhappy Japan is facing will soon arrive at our shores. Boomers, therefore, better not count on the next generation to buy them out of their homes at nice premiums, especially if they are still living in the basement. They are looking at best at an “L” shaped recovery, which means no recovery at all. What are the investment implications of all of this? Get your money out of America and Japan, and pour it into Vietnam, China, India, Brazil and other emerging markets with similar population pyramids. You want the wind behind your investment sails, not in your face with hurricane category five violence. Use this dip to load the boat with the emerging market ETF (NYSEARCA:EEM).