ACT 7 - Life After Globalization Part 2

Yesterday I began to summarize Peter Zeihan’s recent speech called Life After Globalization, and discussed how Americans are abandoning their role as world police. Today we will summarize what that looks for the coming decade, and how Accredited Canadians can position themselves to benefit from this trend. 

 

In his 2021 Land Investment Expo speech given on Jan 25th, Peter reiterates For an economy to grow, you need consumption led demographics, meaning a population pyramid with lots more babies at the bottom than elderly people at the top.  Young families spend and borrow, middle aged people save, and old people invest.  Economies and investments grow because there is more demand for money than there is money is available. Less savers than spenders means savings are worth more, and competition for these savings means lenders / investors can demand higher interest and higher investment returns. 

- The world is aging very quickly, and China is the fastest aging society in the world, and I quote Peter here: ”they have already aged past hope of becoming a consumption led system, and are enjoying a moment in time right now where they are export led but that will end by the end of the decade". Most developed countries have population pyramids with a similar huge bulge in the middle, and will in a few decades look more like a top than a pyramid.

 

 

 

- Americans are an exception to this, their demography is quote "not perfect, but it is by far the best in the world".  

 

 

 

 

- Peter classifies countries in three categories

1. Consumption led (ie. growth),

2. Export based, and

3. Worst of all, Post Growth. 

The year 2020 shows the U.S being a consumption led (ie. growth) system, China being export led, and only Japan classified as post growth.  But By 2030, China and many other countries demography will see them join Japan as being post-growth, with more old people than young people and an upside down population pyramid. 

 

 

Peter's 2021 Predictions in this talk was tailored to his audience at the Land Investment Expo  are that

- 2/3 of the UK's food will need to be re-sourced due to them leaving the eurozone and that can't help but benefit American agriculture

- The old US Trade representative was a tough negotiator, who put in place new deals with half of American trade partners (listed as Japan, Korea, Canada, Mexico and soon the UK).  The new US trade representative appointed by the Biden administration is a trade lawyer, so there won't be any new trade deals for anyone else, just lawsuits. 

- The US has placed tough tariffs on China, and these will likely increase under Biden, further angering the Chinese. 

- Americans are moving West and South for a lower cost of living (this is millennials), better weather (this is baby boomers), and to get away from mass transit. The 2020 /2021 movements is greatest internal migration since the GIs came home from the war.  Cities and land in the West and South areas will see real estate prices rise. 

 

 

My opinion on the best way I believe the way to Act on this information is to:

First. Focus on investing in winning nations, and segments of the market likely to benefit from the demographic trends. 

Second. If buying investment real estate or a business, take the long view and buy where consumption, populations and jobs are growing (for example, the American midwest and south, some Canadian cities like North Bay ON, Chilliwack BC, Lethbridge AB, and St John NB). It’s easier to ride a demographic wave of an area than it is to pick good deals in a stagnant market.  The forthcoming Canadian census data being collected in 2021 should help bring growth areas worthy of targeting into focus. 

Third.  Money for Investment capital will only get cheaper as years go by in the areas with an aging demography as more people look to invest money in increasingly scarce deals.  There is real opportunity to move cheap capital from post-growth markets into growth markets. 

 

I’m not a financial advisor, so don’t take any action without first consulting your own professional advice.