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Halebop
09-02-2005, 11:01 AM
Probably a topic to bore the socks off the average trader working on a 5 day cycle but here goes...

What themes are driving investment in the longer term (5+ Years)? What sectors should I park my money in? I have a few macro ideas but would love to hear alternate views or smaller themes within the macro context:

One of the biggest Western / OECD themes are Baby Boomers. They are mostly all working and as a group earnings are at their peak now: They've got that small business, management job, consultancy or maybe just the experience to earn a little better. The richest of them are just now starting to retire but the retirement groundswell won't begin for another 5 years or so, then its 20 years of declining economics for them. But they will still need some services which will bode well for some industries like reverse annuities, retirement homes, medical care etc.

Stemming from the Baby Boomers is conspicuous consumption. Retailers have had an amazing decade. There is still probably a few years of puff left in this before they need a replacement source of demographics. Also on the conspicuous consumption side is Government. They've grown a fat purse on the boomers' demand driven bounty. This has led to a gradual loosening of purse strings. Now Capital Works and Infrastructure is getting some resource. The irony is, at a time when Western Governments should have the most money to spend (New Zealand at least has got this part right) they are relying upon the promotion of the so called Private-Public Partnerships.

In order to keep the economic and taxation ball running what will we do to replace Boomer productivity and consumption? Immigration seems the most likely course although some blue rinse and shaven head xenophobes seems to object.

China and Resources also figure large and is perhaps New Zealand’s likely saviour in the shortish term. China (and maybe a few others like Vietnam) seems likely to transform into the Japan of the 21st Century. Luckily for New Zealand they are water poor at a time when industrial output is putting pressure on this most basic resource. That in turn impacts food production. Its no accident nor "pity date" that they have chosen New Zealand for a free trade pact.

The industrial output growth in China in turn is leading to rising consumerism (which is still quite tiny on per capita and income basis). Both impact the need for various basic and complex metals and minerals. Notwithstanding the inevitable short term gyrations up and down, this implies good demand for primary resources into China for the foreseeable future and maybe several decades. Some commentators have opined that we are entering the 60s and 70s again in this regard.

What else? Oil? Property? Inflation? Views? Abuse?

Edit: Poor Typing/Spelling.

stephen
09-02-2005, 11:50 AM
Ooh, speculation! Can I try?

Inflation? Try deflation on for size.

Manufactured goods in general are getting cheaper and cheaper (staggeringly so if one compares their capabilities with their predecessors). Food is getting cheaper. Higher local labour costs will be countered by offshore outsourcing and automation (and eventually, wage decline in a self-sustaining deflationary cycle). Oil, I think, will stay where it is for some decades - there are still big untapped reserves to come on stream in Alberta etc, and the Saudis et al can open the taps any time they like. Only land is going up...

... how lovely to be an investor in a deflationary environment, where the modest returns are amplified in buying power each year. Bring it on, I say.

Trade wars will be fought over copyright and patent law. Eventually, information hoarders will lose, but not before pissing off all their customers and imposing heavy financial burdens on them as they struggle to stay afloat. Long term, owners of so-called intellectual property will find their "property" was a legal fiction that society can legislate for or against, not a real thing. (Example: who has a better future long term, Sony the manufacturer, or Sony the entertainment company? Historically, do legislated monopolies like this persist?)

In New Zealand, the age of child bearing will rise under the pressure of student loans etc. Some will choose to remain childless to retain their consumerist lifestyle. So we will see increasing labour shortages in jobs done by young people, and increasing markets for "cheap hedonism", ie luxury food and drink, personal services etc. We will continue importing doctors and dentists and other professionals from the 3rd world, thus using their education systems to subsidise our own, while we export our own clever people elsewhere (hope they send money back to mum and dad!)

Now for the abuse.

Does this really make any difference for the value investor? I think not. The worst sectors may still have fantastic bargains, while the best will be crowded with competition with no obvious winners. The canny will be snooping around for value and they won't care where they find it.

Capitalist
09-02-2005, 01:35 PM
Good thread Halebop :). I am getting a bit cautious about our GCL investment BTW. Don't know how much upside is left there.

Anyhoo...in regard to Baby Boomers, property is the thing. Lots of boomers have invested in property for their retirement. When they start needing the cash we will obviously see a lot of selling pressure. You have to know what U R doing to invest in property at the moment. The effect on shares will be minimal, as they are much more liquid, in spite of doomsayers and Kiyosaki's handwringing.

Interesting times.

Placebo
09-02-2005, 01:45 PM
Population change will be one factor, economic change will be another, brought about by evolution within both NZ's economy and others which we now consider "developing" economies (Indonesia, China, India).

NZ has an ageing population, and in addition to this the age profile of our workforce is changing. Contrary to demographers predicting doom as the pool of workers shrinks and retirees grows, I see people continuing to work well past retirement age and this being a trend that will continue. Our natural population growth (birth rate) is in negative territory, so the only way to grow the population is through migration. If this doesn't fill the needs of a growing economy, then older workers will continue to be wanted.

In a strictly NZ environment, I can see opportunities in some of the policies that are currently being implemented, such as govt-subsidised superannuation (at least for public servants) and the Cullen Fund. Even if it doesn't provide all our needs for retirement, the fund will help sharemarket investors get there by boosting the demand for NZ shares (even with a small percentage of the fund invested in NZ, it is still a significant player in the local market). The trick is to pick what they will buy into -- most likely low risk stocks with a decent yield, TEL, CEN, AIA.

I think the offer of subsidised super schemes will help mitigate the impact of student debt on new workers' willingness to invest in the market. The pool of investors will continue to grow, and in any case, the impact of retail investment on the market is very small so will have negligible effect. What is more important is confidence in managed funds and their ability to draw new customers and continue investing.

Changes in the housing market is another interesting area. Fewer people own, but the number of houses is growing at a faster rate than the population. More people in single occupant dwellings. This more than anything is driving demand for new buildings, it's a trend I don't see an end to any time soon.

As far as a strategy goes I have concentrated so far on sectors where I feel there are dominant players or natural monopolies (at least in NZ), or where there is constant demand such as in utilities (CEN and AIA). I do see further opportunities in energy and resources, but picking which company will be a winner is more speculative. I have dabbled in retail, but despite a happy experience I consider it cyclical and difficult to pick, so probably won't go there again. The other growth area is in health care (FPH, Wakefield Hospital) and in rest homes (MET, RYM).

Then again, property market will probably prove us all wrong by continuing to grow and grow.

Halebop
09-02-2005, 01:49 PM
Interesting indeed Cap.

If you're worried about GCL just go to Hotcopper. Some keen fanboy over there is predicting a PE of 10 and has conveniently forgotten they aren't paying any tax to boot. $10 here we come! (Um, for the record and those without a sense of humour, I'm just kidding, I don't think they are worth $10)

limegreen
09-02-2005, 02:14 PM
quote:Lots of boomers have invested in property for their retirement.

I'm not meaning to raise an argument here, but I hear this statement a lot, and just would like to probe it a little, so please indulge me. (DISC: Recent first home buyer).

My first question is does this mean that their retirement is their freehold property (ie, obsession with paying off mortgage rather than owning shares and to hell with capital repayments), or that many of them are rental property owners? If the former is true, then some sale and downsizing seems likely (but will capital eating mortgages become less expensive/more the norm?). If the latter is true, will they necessarily sell the properties or merely employ property managers? And assuming there is still some demand for rentals, will that side of the equation keep prices up?

stephen
09-02-2005, 02:19 PM
Another thing to throw into the mix is that in New Zealand, fewer and fewer people are inheriting more and more, as family size decreases between generations.

Human nature being what it is, some people will hang on to it - but most will spend it.

Halebop
09-02-2005, 02:24 PM
Who knows?

I imagine it could make relatively illiquid property holding less attractive to retirees. However, finance and life insurance providers will also move to fill the void by offering more flexible finance options as well.

Assuming we sucessfully use Immigration to meet labour and taxpaying needs, this should also provide a continued source of real estate demand.

The only thing I do know though is that without population growth - regardless if from increased birth rate or immigration - then simple demographics results in less demand for both investment and primary dwellings. This would mean lower rental earnings and capital values.

Placebo
09-02-2005, 02:44 PM
Fastest growing housing type is 1 and 2 bed apartments and townhouses. 3 bed and larger family homes will still be around but not a growth market.

Halebop I thought you were trying to bore our socks off... ;)

Cooper
09-02-2005, 03:56 PM
Nice topic Halebop...
For NZ I'm taking comparative advantage literally in an era of agricultural trade reductions (Free trade with China, US Ag tariff reductions, WTO focus on reduction of ag trade barriers). Have been eyeing up the odd farming co. in NZ... the criteria being "who would adapt most readily to open foreign markets".

RYM, ABA, and other "elderly care" companies... as suggested, certainly worth casting an eye over. Also, as Placebo has said investment in smaller housing is a wise idea.

As you say... financing co's (perhaps offering reverse mortgages) and financial management for retirees (especially if the govt comes through with the steps it has signalled it might in regards to capital gains tax in the housing market) look good.

Halebop
09-02-2005, 04:23 PM
quote:Originally posted by stephen

Another thing to throw into the mix is that in New Zealand, fewer and fewer people are inheriting more and more, as family size decreases between generations.

Human nature being what it is, some people will hang on to it - but most will spend it.


That's a good point Stephen. Markets were worried about what the boomers would do with the "silver foxes" money a few years back but now that its started happening they've forgotten all about it. Although I suspect the relatively strong results we are seeing despite various issues and problems might be the result of that.

The boomers in turn will have to leave their estates to mostly 1 and 2 children families. Assuming something is even left, what happens with those readies?

I should add that this is a long time off - Is we assumed the last person standing was the woman/wife in the boomer relationship and she lived 'till 80 then this trend doesn't begin until 2026 and we won't hit the middle until 2035. All the same, their kids will be at peak earnings capacity then too so that should represent a new cycle of wealth creation and consumption.

'Course I'll be 56 when this starts and either too rich, too tired or too dead to care! [:p]

Halebop
09-02-2005, 04:28 PM
quote:Originally posted by Placebo

Fastest growing housing type is 1 and 2 bed apartments and townhouses. 3 bed and larger family homes will still be around but not a growth market.

Halebop I thought you were trying to bore our socks off... ;)


Thats a good point too Placebo. Who's buying them right now I wonder? Is there any data on that?

Capitalist
09-02-2005, 06:13 PM
quote:Originally posted by limegreen

My first question is does this mean that their retirement is their freehold property (ie, obsession with paying off mortgage rather than owning shares and to hell with capital repayments), or that many of them are rental property owners? If the former is true, then some sale and downsizing seems likely (but will capital eating mortgages become less expensive/more the norm?). If the latter is true, will they necessarily sell the properties or merely employ property managers? And assuming there is still some demand for rentals, will that side of the equation keep prices up?


Good question my son. People are using rental properties as savings instead of putting money in the bank. When they retire they will have to use the principal and will start selling. The rental is not enough to live on. That is the future according to most economists - make of it what you will.

Winston001
10-02-2005, 08:54 AM
Excellent topic. As babyboomers start to retire or work less, leisure spending should grow. Disney, Club Med, Casinos, golfing tours etc. I agree with Stephen that consumption of "cheap" easy pleasures such as luxury foods, wines, concerts, jetboat (not too fast) rides etc will rise.

Presumably some form of older tourism will develop, both within NZ, and in other destinations. More comfortable than backpacking but more active than 7 hours on a bus each day.

Beyond that, healthcare has to be a winner. Older people already tell us that all the money in the world is of no use if you don't have good health to enjoy it. So people will buy hip replacements etc or carry the insurance to ensure they can carry on. This already happens.

Aged care should also be a winner, but who pays for it? The current Generation X have grown up in a time of me-first, as opposed to babyboomers who grew up during the flowering of social democracy. Indeed, some of us were proto-communists in our callow youth.

So we'll have to pay our own way, and the level of care will probably vary hugely between public and private. As happens in the US right now.

Energy will continue to be needed so oil isn't likely to decline soon. Look for efficent alternatives such as gasahol crops. There are quite a few but at present they require the funding of governments or mega-corporations to develop. Eg. mirrors in space beaming energy down to a power station.

Placebo
10-02-2005, 10:37 AM
quote:Good question my son. People are using rental properties as savings instead of putting money in the bank. When they retire they will have to use the principal and will start selling. The rental is not enough to live on. That is the future according to most economists - make of it what you will.


Gareth Morgan wrote a thought-provoking column on this, published in the Dominion-Post last year. Was a bit of a doomsday scenario whereby large number of people holding large numbers of rental properties all chose to sell in a relatively short time frame, leading to meltdown in property market. Probably a worst-case scenario but it's something to consider. The column is well worth a read if you can locate it. Ultimately Morgan's argument is that we are all in trouble if this scenario emerges as most NZers are relying on home ownership to provide a nest egg in retirement.

This is a similar item on the Infometrics website http://nbr.infometrics.co.nz/column.php?id=928

Halebop
10-02-2005, 11:12 AM
I actually buy the boomer - sell - off - housing - bubble - collapse theory (or at least an extended period of "under-performance"). However, there are so many variables involved and it could easily be resolved by encouraging population growth, particularly immigration.

Westie
22-02-2005, 08:29 AM
quote:I actually buy the boomer - sell - off - housing - bubble - collapse theory

Funnily enough, if you read books on buying property, they all start with why buying shares isn't a good idea and the main argument is that the retiring generation will be selling their shareholdings to get their hands on cash a la Gareth Morgan's theory on housing! I should point out that some of these are US books and the retirement plans there are built around shares (4whatever-k plans or something) so perhaps there is a fundamental difference there.

I don't really agree with either. In my experience, when it comes to money people are primarily driven by fear and greed. People become more risk averse as they age. COupled with the fact that most people have no idea when they'll die, I think they'll continue to hold the majority of their assets for safety reasons, especially if they are income yielding. It is when they die and their family inherits the assets that they'll probably be sold....

limegreen
22-02-2005, 08:56 AM
quote:I actually buy the boomer - sell - off - housing - bubble - collapse theory

Just to add to my previous comment about financial products changing, I saw a full page ad for a Reverse Annuity Mortgage, or something like that, which is basically an eat the capital from your house deal. More of this could prevent a collapse.

Personally, I think that if you consider that older people (haha, generalisation coming on) like to own a house as their core capital, I'm not so sure that they'll like selling, although they won't be great fans of mortgages either, perhaps recollecting the days of 18% interest.... so maybe it will come down to the lesser of two evils.

duncan macgregor
22-02-2005, 12:14 PM
What i see about to happen in this day and age is, more reverse mortgages with people spending up before they go. We are all more selfish, with i want attitudes to travel, and holidays and less consideration is given to leaving the family homestead to the offspring to fight over. Lets face it we have more to spend have more opportunities to spend it, and increasing difficulty trying to save it. Until the time comes when you can see dead bodies in the street, saving is never going to be popular. The money in the house might well be reinvested in the market depending on what type of an old boring bastard you are. macdunk

Westie
22-02-2005, 12:28 PM
Agree, carte blanche selling I can't see happening. Growing popularity of various ways of unlocking capital gains in assets as income streams e.g. reverse mortgages, I can see happening.

Halebop
22-02-2005, 03:03 PM
I can see reverse mortages happening in a much bigger way too, however I think this will most likely occur for the primary residence. I don't see it happening for the 1/3 of housing stock held for investment purposes.

I haven't seen much data on the demographic spread of investment housing ownership but I can make an educated guess. Most housing yields such low net cash returns I doubt very much a thinking person will retain them to pay for their retirement. I also think IRD are unlikely to allow tax deductability on the interest from loans ultimately used to finance personal expenditure. Its won't be as easy as it sounds to manage the process of gaining personal finance on property that has been structured as a business for tax purposes. Those deferred tax bills will start to bite. Additionally, as these people age, their ability to self manage and maintain these investments will diminish, further reducing both the attractiveness and returns.

I think it much more likely the money would be diverted to cash, annuities and managed real estate options such as Commercial Property Trusts.

The youngest baby boomer is 41 this year. The oldest 59. We could easily assume that the bulk (2/3rd's +?) of investment housing is owned by those aged 40 and over. With home ownership rates diminishing rather than rising, who will buy the hundreds of billions of dollars of real estate at current prices? I think real property prices will ultimately be the casualty.

Halebop
22-02-2005, 03:10 PM
In the interest of keeping the topic broad rather than sticking to the kiwi staples of real estate:

If we assume immigration is the most likely source of new labour and tax revenue. Where will they come from? What opportunities does this create?

Also, as the baby boomers retire, they will probably become more defensive in their investing habits (if any!). Who will win this market share? Banks, Insurance Companies, Fund Managers etc? How will products change to cater to this newly retired and relatively rich wave?

What will they do with their spare time? Skinny suggested to me reading and books is one likely candidate. What else will they do? How do we position to profit?

limegreen
22-02-2005, 04:12 PM
quote:1/3 of housing stock held for investment purposes.

Just before we leave the property comments, I didn't realise that a full third of housing stock was investment oriented. However, while we're playing numbers, my bet would be that primary residences might be worth more than rental properties, thus making investment properties less than a third of property by value (or were you talking by value and not by number anyway?).

skinny
15-03-2005, 02:18 AM
Reading The Economist's quarterly technology review this Sunday in bed with a cup of tea, one intriguing long term investment theme they describe is advanced labour saving devices in the home to alleviate the upcoming demographic crunch, i.e. robots! Perhaps not surprisingly given its grey haired population and technological prowess, Japanese firms appear the most advanced in this field. Expectations are that within 5-10 years a single robot programmed to do a range of household chores from washing windows to feeding the cat will be available at around the cost of a new car. Back to the present, already there are 1.3 million robots in homes (mainly programmable vacuum cleaners and lawnmowers) and the market has been growing exponentially.

Of course identifying a trend is one thing, finding companies that actually profit from it is something else. Sceptics argue consumer robotics are nothing more than gimmicky promotional side lines for high tech companies such as Sony and Samsung. Being a huge sci-fi fan, and having worked on macro ageing issues, I'd like to think there is a bit more to it than that [:I]

http://www.economist.com/science/tq/
http://news.bbc.co.uk/1/hi/technology/3764142.stm
http://cooltech.iafrica.com/features/370298.htm
http://www.jnd.org/dn.mss/robots_in_the_home_.html

OldRider
15-03-2005, 06:54 AM
I wonder what would happen in NZ, if a signicant
sector of our economy was to produce price growth like this.

What will this export growth do to Australia, or is it largely factored in already -
http://www.theaustralian.news.com.au/common/story_page/0,5744,12546187%5E643,00.html

skinny
16-03-2005, 12:25 AM
Interesting article Oldrider. I did not appreciate just how large the terms of trade gain from higher prices received by BHP and Rio Tinto alone would be for Australia. (Not to mention the gains from all the smaller miners which I presume has not been factored into the RBAs estimates).

It leaves me with a bit more confidence that we will see a correction in the NZD-AUD exchange rate sooner rather than later.

cheers

p.s. The robust prices received by NZ's dairy sector over the past 3 years is I guess the closest sector specific analogue to what has been happening in the Oz mining sector. Like the mining complex supply has certainly responded! However, my impression is that domestic currency gains have been smaller of late in NZ both because world dairy prices rises have been much more moderate than iron ore and coaking coal price rises, and of course the kiwi has out-performed the Oz dollar.

robbo
18-03-2005, 12:36 PM
Intriguing Topic Halebop....

& big Well Done for initiating same.... :)

What about the future, for NZ/Aussie closer Economic Co-operation ???...and in particular am specifically thinking of NZ/Australia possibly,.... in not too distant future, sharing a Common Currency...along lines of the Euro perhaps ??...

Do note that Aunty Helen does seem to come to Canberra, quite frequently for various discussions these days... ;)

So; without becoming too patriotic or heated in this consideration, one way or the other...and instead looking at the normal International Relations mutual countries agendas of...common Self-Interest, what do folks think; may be the likely "picture" looking forward...say 5 and 10 years out from today...???

Kind Regards,

Robbo :):)

Halebop
18-03-2005, 01:06 PM
quote:Originally posted by limegreen



Just before we leave the property comments, I didn't realise that a full third of housing stock was investment oriented. However, while we're playing numbers, my bet would be that primary residences might be worth more than rental properties, thus making investment properties less than a third of property by value (or were you talking by value and not by number anyway?).


Sorry LG is missed this question.

I don't know but I've usually seen it quoted as housing "stock" I'd guess its in units of stock rather than value. Ultimately a moot point though as demographics will have the biggest impact and here too I think numbers rather than values are more important.

Halebop
18-03-2005, 01:21 PM
quote:Originally posted by davidrob

Intriguing Topic Halebop....

& big Well Done for initiating same.... :)

Cheers Robbo! I'll give myself a pat on the back. This sort of topic suits my temperament better as I'm a bit of a slow thinker rather than frenetic share-trading man of action. Alas, thinking about this stuff doesn't seem to make me any smarter nor "righter"!

CER is an interesting one that seems to shift and eddy with political expediency ("One Sky" anyone?). Ultimately I think the nologos (tm) will lose and One Market will reign but it may be a long time coming.

Beyond subjective issues of control and sovereignty I think New Zealand would probably benefit from a unified market (or at least more closely integrated). The cynical in me thinks its interesting that Australia becomes more amourous as New Zealand's star ascends though? Its in the non economic fields where I would be most dubious. I like that New Zealand is willing to sometimes take a stand on global issues despite our small size and economic risks. Australia seems a bit "me too" with the States at times. I hasten to add I'm not anti USA or Australia - just pro NZ and self determination.

Winston001
18-03-2005, 06:58 PM
An excellent wide-ranging discussion. I deal with deceased estates from time to time and it is true that people keep assets for many many years. If a person owns some shares in their 60s, they usually still own them in their 80s.

Not so with real estate (apart from a residence). Property requires more work and worry unless there is a family member to manage it.

The proposition for a share crash is based on baby-boomers retiring and deciding to move their stock investments into a safer haven such as bonds and cash. In fact I predict this will include perceived blue-chip stocks - unless there is a crash. Or maybe managed funds - but people are becoming better educated and realise just how unimpressive the funds are.

Also as Gareth Morgan says, retirement is a monster hit. Useful and wanted one day, on the emotional scrapheap the next. It is a new and scary experience producing a dramatic and conservative mindset. Retirees usually want the security of a bank balance rather than equities.

R2
20-03-2005, 02:18 AM
One approach would be to say that picking future investment returns might be best divined not by segmenting population by age but rather by segmenting by value particularly value of disposable income. This being a more reliable indicator of discretionary spending and hence trends and opportunities.

I don't see a bunch of retired folk causing huge opportunities besides the obvious growth in certain goods and services but the disporportinately smaller population with disproportionately higher disposable incomes may be an opportunity. Could be wrong, maybe the folks at Papamoa are spending proportionately more per household nowdays.

Agree the power of natural resources will highly valued, increasingly, and I wonder about NZ's ability to defend these in 40 or 50 years time.

On a more speculative note, looking 10 years out Nanotechnology will be used in everything from smoke detectors embeded in paint to clothing that doesn't get wet and lightbulbs that last 20 years. Nanotechnology might change fortunes more than will the fact that 20% more us will be over 65 years old ? [http://www.crnano.org/]

Halebop
20-03-2005, 11:50 AM
Chasing the money is exactly what demographics is about R2. ...with or without Nanotechnology.

Demographics is important because of the age of Baby Boomers. They are all in the same category right now. It hasn't happened before and will soon shift again. This has been a monumental driver of society and its all about to change.

In 1964 when the last of the boomers were born the first of them were 18 years old. Obviously new born infants and 18 year olds push very different triggers on the economy. Now however they are aged 41 to 59. Their needs and desires are closely aligned. Its not a coincidence HDTV and flat plasma panels are selling so well. Nor that we had a property boom in so many western countries (this one is a double whammy 'cos boomers have been inheriting wealth from their parents - another demographic trend).

However, soon they will split again as the oldest start to retire but the youngest will still be doing what they are now. They will fragment the markets they currently support which will provide an opportunity for anything targeting "oldies" irrespective that this be a poorer market. (Un)fortunately, they won't all be old at once, so the shift will be gradual and could take the shine of some of the things we take for granted right now, like perenially rising real property values (Just look at Germany and Japan to see 20 years ahead into the Boomer trend).

skinny
20-03-2005, 10:35 PM
Halebop, thought I would throw out some counter examples to your thesis. First, Japan and Germany may not be compelling cases to point to the importance of ageing. They are historically very rich but heavily regulated economies with relatively small service sectors. As such, increasing global competition from China and Eastern Europe has hit their manufacturing-oriented economies hard. The poor performance of their housing markets might be as much to do with this as ageing. Both countries have started to cut red tape and free up labour markets to increase their competitivenss and to support the development of domestic services. Interestingly, with these changes there are tentative signs of asset markets coming back to life, e.g. German real estate prices in some areas are rising again and I've seen Deutsche Bank tout German REITs as an attractive investment proposition ;).

In the OECD, I would argue Finland is a more relevant example to look at given it is closer to NZs size, is more dependent on external markets, and has the 2nd most advanced ageing profile after Japan. No one talks about demographic crunches in Finland for the reason it has taken many of the steps required to meet its pension obligations and continues to grow well -- a 20 something year old colleague recently bought an apartment in Helsinki full of confidence!

Turning to NZ, in its favour with respect to ageing is that it has the youngest demographics in the OECD. Dependency ratios do not climb seriously for another 20 years yet. In addition, its asset price levels (especially house prices) remain cheap relative to average levels in many richer OECD economies. When I go back I am shocked by how much prices have gone up but how cheap they are still! If we take the view that the better growth performance in NZ over the past 5 years is a sign that the economy is starting to converge back towards upper OECD income levels then it follow house prices may have many years to run yet, even if (as I expect) there is a bit of fall or flat patch over the next 2-3 years.

Capitalist
21-03-2005, 01:50 PM
quote:Originally posted by skinny

Turning to NZ, in its favour with respect to ageing is that it has the youngest demographics in the OECD. Dependency ratios do not climb seriously for another 20 years yet. In addition, its asset price levels (especially house prices) remain cheap relative to average levels in many richer OECD economies. When I go back I am shocked by how much prices have gone up but how cheap they are still! If we take the view that the better growth performance in NZ over the past 5 years is a sign that the economy is starting to converge back towards upper OECD income levels then it follow house prices may have many years to run yet, even if (as I expect) there is a bit of fall or flat patch over the next 2-3 years.


Sigh...you can be one of my imaginary boyfriends Skinny :D. I have quite a few all over the world now - including Germany! I always knew there were people out there who agreed with me [:p].You can see the forest, not just the trees. Kiyosaki ranted about boomers causing economic Armageddon. I rest my case.

Halebop
21-03-2005, 03:08 PM
Intersting points Skinny.

I wonder though why Germany and Japan are as they are? I think it is no accident they are caught in a time warp and demographics are still the drivers. Could aging boardrooms and executive management teams affect the decisions businesses make? I think the answer is yes. This in turn must permeate big chunks of regulatory and economic framework (for instance - why has it been so hard to buy a public company in both Japan and Germany? I think the demographics play a role in all of this)

A parabel would be the situation in the 50s and 60s when sleepy NZ companies were largely run by conservative elder gents due to post war labour shortages. Defensive mindsets made innovation a rare commodity in sleepy New Zealand. This in turn lead to the rise of younger bucks augered by the likes of Goldsmith and followed by Brierly, Spalvens and a cast of colourful Gordon Gecko like characters in ths States.

Halebop
21-03-2005, 03:10 PM
I'm not a fan of Kiyosaki Cap but you are 10 to 20 years too early to know the impact of the Boomers. They are still earning and spending a lot of money right now.