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How to deal with Seven Billion People? - Fullermoney

Last updated: 04:23 26 Oct 2011 EDT, First published: 03:23 26 Oct 2011 EDT

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This is an interesting and thoughtful article by Joel Cohen for the NYT and IHT. Here is a section:

Where is this taking us? The coming half century will see huge shifts in the geopolitical balance of numbers, further declines in the number of children per woman, smaller but more numerous households, an increasingly elderly population, and growing and more numerous cities.

The United Nations Population Division anticipates 8 billion people by 2025, 9 billion by 2043 and 10 billion by 2083. India will have more people than China shortly after 2020, and sub-Saharan Africa will have more people than India before 2040.
In 1950, there were nearly three times as many Europeans as sub-Saharan Africans. By 2010, there were 16 percent more sub-Saharan Africans than Europeans. By 2100, according to the Population Division, there will be nearly five sub-Saharan Africans for every European.

In some ways, the growth in the numbers of people matters less than the growth in the numbers of households. If each household has its own refrigerator, air-conditioner, TV and car, the average energy demand for a given number of people goes up as the average number of people in a household goes down.

The urban population of developing countries is expected to grow by a million people every five days through at least 2030, while the rural population falls. Many cities will eat into prime agricultural land unless they grow in density, not extent. And nearly half of urban population growth by 2015 will occur in cities of fewer than half a million people.

The coming revolution in aging is well under way in the more developed countries. It will go global in the next half century. In 1950, for each person 65 and older, there were more than six children under 15. By 2070, elderly people will outnumber children under 15, and there will be only three people of working age (15 to 64) for every two people under 15 or 65 and older. Pressures to extend the "working age" beyond 65 will grow more intense.

Is economic development the best contraception? Or is voluntary contraception the best form of development? Does the world need a bigger pie (more productive technologies) or fewer forks (slower population growth through voluntary contraception) or better manners (fewer inequities, less violence and corruption, freer trade and mobility, more rule of law, less material-intensive consumption)? Or is education of better quality and greater availability a key ingredient of all other strategies?

All these approaches have value. However much we would like one, there is no panacea, though some priorities are clear: voluntary contraception and support services, universal primary and secondary education, and food for pregnant and lactating mothers and children under 5.

These priorities are mutually reinforcing, and they are affordable. Providing modern family planning methods to all people with unmet needs would cost about $6.7 billion a year, slightly less than the $6.9 billion Americans are expected to spend for Halloween this year. By one estimate, achieving universal primary and secondary education by 2015 would cost anywhere from $35 billion to $70 billion in additional spending per year.

My view - My guess is that the numbers can be managed, given the increasing rate of technical innovation affecting all aspects of our lives. However, this needs to be accompanied by improved governance, universal education, better management of our planet and its resources, and luck.

All but luck are possible as part of our evolution as a species but none are certainties.


Internet Trends - My thanks to a subscriber for this superb, informative report by Mary Meeker of KPCB. It is posted in the Subscriber's Area along with my comments.


Useful nuggets of information - My thanks to a subscriber for this report which is posted in the Subscriber's Area along with my comments.


Tim Price: Robot judges and the watch pot - My thanks to the author for his latest letter, an outstanding issue in my opinion, published by PFP Wealth Management. It is posted in the Subscriber's Area but here is a sample:

Anybody tasked with staring at a Bloomberg terminal on a regular basis inevitably turns their thoughts to the motives of all those unseen investors silently driving markets higher or lower, on a daily basis. Our lizard brains, one suspects, are not well-suited to watching investment markets soar or collapse with exactly clinical detachment. "Fight or flight" does not translate well, or necessarily profitably, to volatile markets in one's pet investment themes. But our hypothetical Bloomberg-watcher, if not ourself, also labours under the fair presumption that there are unseen humans at the other end of those trades. What if they're actually robots ? One of the few, and perhaps only, intelligent insights that John Maynard Keynes made was his comparison of financial market participants with judges in a beauty contest:

"It is not a case of choosing those [faces] that, to the best of one's judgment, are really the prettiest, nor even those that average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practise the fourth, fifth and higher degrees."

Or in other words, investors tend to spend a good deal of time trying to anticipate the market reactions of other investors - as opposed, say, simply to uncovering objective deep value and sticking with it. So what happens if our putative beauty contest / financial market judges are actually machines? Some sources indicate that high frequency and algorithmic trading (for want of a better short-hand: a bunch of robots) now accounts for three quarters of all US equity trading volume. So our hypothetical Bloomberg-watcher is now trying to assess the extent of greed and / or fear at work in a market that may be devoid of much direct emotional response and is now the plaything of a dispassionate trading algorithm or two. Good luck in trying to understand what R2D2 thinks about the latest unemployment figures.

The human brain has evolved to a high art of pattern recognition. The exquisite irony of our time is that we may be looking for patterns in markets where none really exist - just the vapour trail of C3PO?s latest software instructions.

My view - I maintain that the HFT robots have increased day-to-day volatility. This is a much bigger problem for traders rather than investors, provided the latter are unleveraged and can develop an emotional and analytical indifference to the volatility.

I commend the rest of this issue to all investors, not least the 'Fooled by Randomness' conclusion.


Today's interesting charts - Note Eoin's chart additions below and on most days. Subscriber's requirements have been instrumental in developing this Library.

US 30-Year T-Bond futures (weekly & daily) recorded their second upside daily key reversal today, confirming a short-term oversold condition and scope for somewhat higher ranging towards the September and early-October peaks beneath which more resistance is likely to be encountered. A close below 137.45 would be required to offset this outlook and signal lower levels to follow.

This item continues in the Subscriber's Area.



Additional commentary by Eoin Treacy

It's good to be back - This trip to China was one of my best learning experiences yet. I will post a summary of my observations tomorrow.


Email of the day (1) - on a response to the renewal questionnaire:

"I like everything about Fullermoney. I regret that the long-term charts in many instances do not go back for a longer period of time, especially with regards to gold and silver, and I would love to see charts on gold coins, in particular the classical ones (Eagle & Liberty in the US, the Kruger Rand, the English Sovereign, the French Napoleon and the Mexican Peso, the Swiss Vreneli and the Russian Tchernev) because in today's world it is the change in premiums that reflects the price and premiums of these coins that reflect the popular as opposed to financial entities' interests or fears.

"I also believe that with the huge confusion created by the rapid ups and downs of currencies and the weakening of the dollar influence sporadically, gold expressed in Swiss francs and in Euros would also be very interesting to have in the charts.

"Looking forward to seeing you in November at the Chart Seminar"

My comment - Thank you for your generous feedback and I am also looking forward to renewing our acquaintance at The Chart Seminar. The chart library is capable of plotting a little more than 50 years of data. In most cases this is usually more than ample because our data feed from Bloomberg does not generally have longer time series than that. To draw a 50-year chart, choose a suitable instrument and a line or candle chart. Click on the Charting tab located in the charcoal bar above the chart area. Select 'Monthly' from the Sample dropdown menu and '50 Years [max]' from the Period dropdown menu. Then hit Apply.

This section continues in the Subscriber's Area.


Email of the day (2) - on an excerpt from a report forwarded by a subscriber:

"Euribor spreads have fallen from a high of 89 bp on 23 September to 74 bp currently. We have been suggesting in our recent notes that MXASJ did not bottom in 2008 until TED spreads (proxy for contagion to the banking system) peaked. So it is rather encouraging to see Euribor spreads (the European equivalent of TED spreads) fall from a high of 89 bp on 23 September to 74 bp currently. If this fall in Euribor spreads sustains, we estimate further upside of around 20% as our year-end target for MXASJ is 575. We continue to favour the two most under-owned markets of Korea and Taiwan where net foreign selling over August and September was 0.5% and 1.3% of market capitalisation, respectively (see Figures 2 and 3 under Focus charts)."


My comment - Thank you for this excerpt highlighting the pullback posted by the Euro 3-month Libor - Euro 3-month yield spread over the last two weeks. As a measure of the perception of risk in the Eurozone's banking sector a declining premium of bank debt over that of governments is a positive.

This section continues in the Subscriber's Area.


Email of the day (3&4) - on charts for stock market index yields in the Chart Library:

"Is it possible to post charts of the S&P 500 and FTSE all share yields and also the Dow gold ratio that I can save in my Favourites. Both of which I have searched for in the library without success. Thanks."

And

"Do you have on your website charts of PE ratios of foreign stock markets? i.e. Hang Seng?"

My comment - Thank you for these questions which others may also have an interest in. The Dow / Gold ratio can be found in the Relative Charts section of the Chart Library or by using 'Dow" as your parameter in the Chart Library's dedicated search. This can be added to your Favourites by either clicking on the green '+' sign to the left of the title in the menu or by clicking on the 'Add to Favourites' tab found to the right of the charcoal bar located above the chart.

This section continues in the Subscriber's Area.


IMF: Will deficit reduction lead to stronger growth and job creation in the short run? - Thanks to a subscriber for this thoughtful report from the IMF. It is posted without further comment but here are a number of excerpts:

"Over the past 30 years, there have been 173 episodes during which 17 advanced economies undertook budgetary measures aimed at fiscal consolidation. (The countries are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Portugal, Spain, Sweden, United Kingdom, and the United States.) The average size of fiscal consolidation was about 1 percent of GDP a year."

"…the evidence from the past is clear: fiscal consolidations typically have the short-run effect of reducing incomes and raising unemployment. A fiscal consolidation of 1 percent of GDP reduces inflation-adjusted incomes by about 0.6 percent and raises the unemployment rate by almost 0.5 percentage point within two years, with some recovery thereafter. Spending by households and firms also declines, with little evidence of a handover from public to private sector demand."

"Fiscal contractions raise both short-term and long-term unemployment but the impact is much greater on the latter. Long-term unemployment refers to spells of unemployment lasting more than six months. Moreover, within three years the rise in short-term unemployment due to fiscal consolidation comes to an end, but long-term unemployment remains higher even after five years.

Fiscal consolidations thus add to the pain of those who are likely to be already suffering the most-the long-term unemployed. This is a particular worry today since the share of long-term unemployed increased in most Organization for Economic Cooperation and Development countries during the Great Recession. And even in countries where it did not increase-such as France, Germany, Italy, and Japan-the share had already been very high even before the recession."


Email of the day (5) - on Irish government bond yields not updating:

"Can you fix the feed for the chart on 10-yr Irish bond yields? It is only updating to 11 Oct. Thanks."

My comment - Thank you for pointing out this cessation. Ireland has not issued new bonds since it agreed to a bailout from the EU/IMF last year. Therefore there are no new 10 year bonds with which to compile an index of yields. I have added the Irish Government 9-year yield to the Chart Library which is probably now more representative. The Irish government appears likely to test the appetite for debt at some point next year. It is reasonable to assume there will be a 10-year issue.


Email of the day (6) - on surprise indices:

"The chart library has a Citigroup Economic Surprise Index which shows that US data is surprising to the upside. Would you comment on this and its connection with the European credit crisis and Asian slowdown?

"Bloomberg also has a similar Earnings Surprise Index. I believe the ticker is SPEDPOSS. Could we include this into the chart library? If there is any other composite index of earnings or earnings surprises, could we include them too into the chart library?"

My comment - The Citigroup US Economic Surprise Index has been largely rangebound for over a decade. It continues to rebound from the lower side and nothing has happened to question current scope for a continued rally towards the upper side.

This section continues in the Subscriber's Area.


Email of the day (7) -
on an addition to the Relative dropdown menu in the Charting function of the Chart Library:

"Would it be possible to add a European wide index to the relative dropdown list? I am interested in a number of European stocks and would like to compare them against the broader euro market. Thanks."

My comment - Thank you for this suggestion but it has already been incorporated into the menu. The STOXX 600 is a Euro denominated Index of Europe's 600 largest companies and can be found on the relative dropdown menu in the Charting function of the Chart Library.


Email of the day (8) - on additions of relative charts:

"Can I ask you to add the following Relative Charts to the Chart Library?

- SX7E/SX7P
- BSE Real / Sensex
- HSP / HSI

"I managed to create some relative charts, thanks to your Fullermoney User Guide, but I couldn't save them. After exiting the chart, the relative Performance chart (SX7E/SX5E) switches back to the absolute performance of the first ticker (SX7E), once you click on it again.

"Any help would be much appreciated."

My comment - Thank you for these suggestions. It is not possible for subscribers to save relative charts as permanent fixtures in the Chart Library and therefore not possible to add them to your Favourites. I have added all of the above ratios to the Relative Charts section.


Email of the day (9-16) - on additions to the Chart Library:

"I noticed the "Citigroup Economic Surprise Index" for the USA in the chart library. I was wondering if you could add the European, Emerging Markets and any others. For example Major Economies, Euro, Emerging Markets, UK, Japan, Australia"

And

"Please add the Market Vectors Renminbi Bond ETF (CHLC) to the Chart Library."

And

"Could you please add the Henderson Asian Dividend Income fund to the library? Thanks."

And

"Could you please add the Deutsche Bank ETF (UK) for Chile to the library? Code is XMCL. Thanks."

And

"Would you please add the following UK Fund to the chart library: Fidelity Global Real Assets Securities Fund GBP Class ISIN LU0468715619 SEDOL B44Z547. Thanks."

And

"Can you please add a chart for Princess Private Equity Holding Limited? Many thanks."

And

"For Eoin on his return, or for his locum; please add PMC.AX"

And

"The Reserve Bank of Australia base rates (RBACTR and Canadian bank rates (CABROVER) have not updated. Could we also get the bank overnight rates for Israel? Thank you."

My comment - Thank you all for these suggestions which have been added to the Chart Library.


Speaking engagements - I have agreed to participate in couple of events at this year's World Money Show in London. The times and dates for these are.

Panel discussion "Global investing: Where in the world are the next breakout winners?" 4.30 pm - 5.30pm on Friday November 11th.

I will also host The World Money Show's inaugural Alumni Coffee/Tea Meet & Greet between 8.15 am - 9.15am on Saturday November 12th.


The Chart Seminar November 3rd and 4th -
The next TCS will be in London, on the fast approaching dates above and held at the Radisson Edwardian Hampshire Hotel. This is in the heart of London's West End, with the main entrance on the lower side of Leicester Square and views overlooking Nelson's Column in Trafalgar Square.

Bearing in mind the adage: Wealth is accumulated in down markets and realised in up markets, this is a good time to develop and hone one's behavioural, technical skills.

Come along to learn, contribute, profit and enjoy. 

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