Turning Japanese

Japanese - blog
 

Originally posted Tuesday, May 24, 2016

“I’m turning Japanese. I think I’m turning Japanese. I really think so.”1

One of the very interesting aspects of our job as financial planners is listening to our many clients varied views of world events. I thought I would use this month’s blog to address (OK, debunk) those that are myths and misperceptions.

Baby Boomers will wreak financial havoc on the market when they hit retirement. That is the perception.

The reality…the two younger generations are almost as large individually, and significantly larger collectively, than the Baby Boomers. In fact, nearly 60% of the 75 million Baby Boomers are between ages 50 and 59. Starting to show a little paunch, but hardly ready to swamp the retirement system.

Millennials, those ages 18-34, now number 75.4 million, surpassing the 74.9 million Baby Boomers. Generation X (ages 35-50) is projected to pass the Boomers in population by 2028.

Is the U.S. Demographically set to become the next Japan? In a word…No.

The median age in the U.S. today is 37 years old. In Japan, the median age is 46. By 2050 it is projected that there will be over 400 million Americans and the median age will be 39 years old. Japan’s median age in 2050 is projected to be 55 years old.

Of the 620 countries the U.S. is projected to have the 4th youngest population by 2050. For the U.S., demographics are a tailwind

Aren’t we in the twilight of the American century? After 20+ presidential debates it becomes easy to focus on the negatives in our country. I don’t believe these.

The United States remains the largest economy in the World. China…their per capita GDP is one quarter of ours! China’s $14,000 per capita income places them 84th in the world…behind Libya and Algeria!

Among the U.S., Brazil, India and China, the U.S. ranks 1st in nuclear production, natural gas production, refined oil output, and in exporting goods and services. U.S. auto sales in 2015 hit an all time record of 17.5 million cars and light trucks sold. U.S. housing starts have recently been above 1.2 million units which is an 8 year high.

In his JP Morgan Letter to Shareholders, CEO Jaime Dimon writes, “For years, this country has had a fairly consistent job growth and increasingly strong consumers (home prices are up, and the consumer balance sheet is in the best shape it’s ever been in.)

Warren Buffett (whom I never get tired of quoting) laments doom-saying politicians and also takes aim at fears about slow economic growth. At the current annual pace of U.S. growth of around 2%, Buffett argues that while “we would all like to see a higher rate,” such a pace would still deliver “astounding gains” over time. He concludes, “For 240 years, it has been a terrible mistake to be against America.”

As always we welcome your thoughts and views on these topics and wish you all a great summer.


References:

1Turning Japanese. The Vaports 1980
Source: US Census Bureau 2013
Source: Ned Davis Research 2013