Investment Themes
Aging Demographics- In developed countries, an aging population and declining birth rate leaves fewer people to support retirees which; in turn, further strains future government budgets.
- In 1950, there were seven people per retiree in 1950 in the U.S. Currently, the ratio stands at four to one and is projected to be two to one by 2050.
- The Baby Boomer generation in the U.S. accounts for over $2 trillion of annual spending.
Commodity Surge
- Developing countries have sharply increased demand for many industrial commodities and energy sources and there does not appear to be enough new supply coming on-line.
- Crude oil consumption rose from 77.8 million barrels per day in 2002 to 84.5 million barrels per day in 2006.
- The world now has 6.5 billion stomachs to feed compared to 2 billion in the 1950’s.
Water Shortages
- Less than 1% of the world’s water is fit for drinking or other essential activities.
- Over one billion people do not have access to clean water and 2.4 billion people are subject to stressed water conditions.
Alternative Energy
- Almost $155 billion was invested in renewable energy companies in 2008, four times the amount spent globally in 2004.
- High energy prices and broad-based political support and subsidies will ensure multi-year infrastructure spending.
Infrastructure Boom
- Developing countries are experiencing a large scale migration from rural to urban centers.
- OECD projects $16 trillion will be needed over the next three decades just for the energy infrastructure.
Emerging Markets
- Emerging Market economies will grow at a substantially faster rate than industrialized countries as productivity improvements increase per capita income.
- In 2000, 90% of the world’s children lived in countries classified as “less developed” providing larger workforces, greater output growth and higher demand.
- Goldman Sachs estimates the Chinese middle class population will reach 650 million by 2015.
Digital Explosion
- Although 1.3 billion people use the Internet, this represents only a 20% global penetration rate.
- Productivity gains in developed countries must rely on technology and innovation to offset the decline in the workforce of experienced and productive workers.
- High Definition TV, broadband and higher bandwidth lines accelerate adoption of bundled packages from cable and telephone companies that include TV, phone and internet services.
Volatility
- Major market disruptions that historically occurred infrequently are reappearing every few years.
- Economic challenges adding to market volatility include rising unemployment, global protectionism, and unprecedented government intervention.