How to invest as the population gets older – MoneyWeek

AnyonewhothinksdemographicsisirrelevantnonsensemightglancetoJapan。

Itexperiencedababyboomslightlyearlierthanwedid,saysHodges。

Japan’sBoomershitthepeakwealthcreatingagebetween1977and1994。

TheNikkeipeakedin1989withgovernmentbondyieldsat8%andgrowthat4%。

Ithasbeenaround1%sinceregardlessofthegovernment’sstimulusefforts。

Theimplications,saidthegovernoroftheBankofJapanearlierthisyear,are“profound”。

Therewillbe“differencesintimingandmagnitude”buteventuallyalldevelopedcountriesshouldexpect“adeclineingrowthpotential,adeteriorationofthefiscalbalanceandafallinhousingprices”。

Hmm。

Lookaroundyou。

Seeanyofthat?

Theendeffectofhavinganageingpopulationwillbearguedaboutforyears。

ButanotefromResearchAffiliatesputsthecostofoursatabout1。

4%ofGDPayear。

Andthat,ofcourse,isnottheonlyheadwindweface。

Thereisourdebt,thecostsofwhichadduptoanother0。

8%ofGDPeveryyearand,aswetryandcutit,theremovalofthe“phoneyGDP”deficitthatspendinghaslongcreated。

ResearchAffiliatesputthisatanother0。

8%。

Addallthatupandthe1%GDPgrowththeUKappearstobeseeinglookslikesomethingofamiracle。

Sohowdoyouinvestintothis?

It’stough。

Lowgrowthandhighdebtmakegovernmentserraticparticularlywhentheirelectoratesdon’tliketheideathat1%mightbeasgoodasitgets。

Somarketsarelikelytocontinuetobepushedaroundbytaxchanges,endlessinflationanddeflationscares,andthedistortingeffectsofaggressivemonetarypolicy。

ThekeytosuccessisputwellbyFirstState’sJonathanAsante:the“furtheryoucangetyourmoneyawayfromgovernmentsthebetter,”hesays。

Thatmeansbuyingthedividend-payingmultinationalsthatareabletoprotectthemselvesfrombothinflation(becausetheyhavesomekindofoligopolistbrandandpricingpower)andfromtheproblemsofanyonestate(becausetheirintellectualcapitalissomobileastobealmostuntaxablelookatStarbucks)。

I’vebeensuggestingyouholdthesestocksforawhilenow,andtheirpopularityisbeginningtomakemenervouspopularstocksareexpensivestocks,andexpensivestocksdon’tstaythatwayforever。

Butitishardtoseewhereelsetogoatthemoment:governmentsareusingverylowyieldsondepositsandbondstoforceusintopayingmorethanwewouldliketochasereturnselsewhere。

Itisn’taparticularlyadmirablepolicy。

Butitdoeswork。