Why wouldn’t it be?
We recently posted about population percentage for each country by age. The data was for 2016 from the World Bank and is the latest set of available data. Here is a map of population percentage for age 65 and above:
And here is a map of interest rates for each country as of June 8, 2018:
See some correlation – direct or inverse?
Do economic fundamentals matter today? We look at the strange market conditions today. We are living in truly interesting times …
Super low Government bond yields
Government bond yields have never been lower with 2-year yields for most of Europe currently negative. The European Central Bank (ECB) is by far the biggest holder of European bonds and the biggest (almost 90%) buyer of the weaker Eurozone (Italy, Spain, Portugal and Greece) countries debt since 2015. The ECB balance sheet is now over 4.5 trillion Euros, some 45% of Eurozone GDP.
Even 10-year yields for Japan and Switzerland are barely positive.
Yields on government bonds for all maturities over 3 months have never been lower in the history of the world .
Some 80% of 10-year Japanese government bonds are held by the Bank of Japan. And apparently there are days when no one trades those 10-year bonds because there is no point of trading it. Why? Well, because the Bank of Japan has a policy to control yield curves and since they hold majority of it there are hardly any price movements.
Continue reading “Do economic fundamentals matter anymore? Part 3 of 3”
How often do analysts get the markets wrong? How often to fund managers get stock picks wrong? They get things wrong far more often then they get it right.
2017 was probably the worst year for hedge funds. And the start of 2018 isn’t turning out to be any better.
The problem probably lies with everyone focussing on the business cycle rather than the structural factors driving the markets. Continue reading “Markets should ignore cyclical factors and focus at the structural factors instead”
An aging world: Babies born in 2018 can expect to live to over 100. In 2015, there were around 600 million people aged 65 or over and that number is expected to rise to over 2 billion by 2050.
Changing demographics: There are currently 8 workers in employment for every retiree today, that number is likely to reduce to 4 workers in employment for every retiree by 2050.
Underfunding: The UK currently has $6.2 trillion in underfunded government and public-sector employee pensions. For the US that amount is over $25 trillion.
Lower bond yields: Previous funding assumed 7% bond yields, the number has been much closer to 2.5% since 2009 which has caused major deficits. Continue reading “The looming pension crisis”
A significant increase in life expectancy during the 20th century has been one of the greatest achievements for society. Better living standards, more nutritious diets, access to cleaner drinking water, Continue reading “Underfunding, lower bond yields and changing demographics could mean you don’t get a state pension”
A significant increase in life expectancy during the 20th century has been one of the greatest achievements for society. Better living standards, more nutritious diets, access to cleaner drinking water, success in the fight against infectious diseases and advancements in science have all contributed to the increase in life expectancy. Continue reading “Should you rely on a state or government pension? The impact of underfunding, lower bond yields and changing demographics”