Category Archives: Economy

Population Trends I – Large vs. Fast (10/29/2014)

World news is dominated by scary headlines: Ebola, Ukraine, ISIS, Arab Spring aftermath and the list goes on. It all got me thinking about what the current world population dynamics look like. Worldbank has a ton of figures available online so instead of throwing 50 dense tables into one gigantic post, I’m going to do a series of short ones. Over the next few weeks, I plan on taking a look at statistics that I personally find interesting and/or surprising.

To start with, let’s see what the world’s most populous nations today are and how fast they are growing. Exhibit 1 shows all countries with population over 30 million people as of 2013. China and India are at the top followed by the United States. After that the ranks are dominated by developing countries across all regions of the world. One surprising factoid for me was that U.S. outgrew China over the past 10 and 20 year. I guess population control policies there worked pretty well (maybe too well based on recent demographic issues).

Exhibit 1 – Countries >30 Million Ranked by Population (million)


Exhibit 2 shows the same set of countries, but this time ranked by 20-Year growth percentage. This version is dominated by African and Middle Eastern countries (many of which don’t particularly like us).

At the risk of sounding insensitive (which I’m not), it is amazing to me that the two countries that have been embroiled in war with the U.S. and intense internal strife are near the top of the list. Namely, Afghanistan and Iraq managed to grow their population 2.5 times faster than the world despite massive loss of life and significant emigration.

Canada, United States and other large developed countries are near the bottom of the list. Interestingly, former communist states share the basement with Germany and Japan. Demographics play important role in health of the national economies and potential investment returns. Countries like Germany and Japan have obviously figured this out long ago and today sport export-oriented economies.

Exhibit 2 – Countries >30 Million Ranked by 20-Year Growth %


All of these numbers represent total population changes that includes natural growth as well as migration. In the next post we’ll try to look at net migration and how it affect various countries.

Economy in Perspective, an 85-Year One

Doing a post on the economy in 2013 got me thinking about how current environment compares to prior decades.  I tried to focus on a very small number of indicators that are truly representative of the national situation and not get bogged down in a forest of minute details.  The numbers in the tables and charts below are averages of the annual data for each decade.

Exhibit 1 presents eight indicators with the highest number for each row highlighted in green, while the lowest is highlighted in orange.  Not surprisingly, the 1930s stand out quite a bit as crappy time to be around.  If we make an argument that 1930s and 40s were “anomalies” what with the Great Depression and World War II, things look a bit different (Exhibit 2).  The 1950s was a model boom decade with a roaring stock market, low interest rates, fast-growing economy, relatively low inflation and a population “baby boom”.  Both the unemployment rate and budget deficit were very low, while the high WWII debt was being paid off.

On the flip side, the 2010s have been pretty crappy so far as indicated by the dominance of highlighted numbers in that column.  Attractive stock market returns are the major exception here.  Of course, we are only 4 years into the decade and things might look quite a bit better down the road.

Exhibit 1 – Important Metrics by Decade (1930s to 2010s)


Exhibit 2 – Important Metrics by Decade (1950s to 2010s)


Now let’s take a look at these metrics one by one in a bar chart form.  These are averages of the annual data for each decade.  Stock market returns have been remarkably attractive for a majority of the 20th century decades, save for 1930s and 2000s (Exhibit 3).  The negative returns for the 2000s certainly help to explain continued investors’ reluctance to invest in equities.  Although fund flows for 2013 show that this might be changing.  Interest rates look like a bell-shaped curve rising in mid-century and culminating in double digits in the 1980s.  From there we began the 30-year decline in rates with a coincident bull market in bonds.  What this chart looks like say 50 years from now is anybody’s guess, but there is not much room left to the downside in interest rates.

Exhibit 3 – Stock Market Returns & Interest Rates


World War II and the subsequent rebuilding led to an economic boom in mid-20th century (Exhibit 4).  Real GDP (adjusted for inflation) is still growing albeit at a slower pace.  Speaking of inflation, after peaking in 1970s (which led to high interest rates in Exhibit 3), it has been steadily declining.  In fact, despite massive “money printing” by the Fed as well as ballooning federal debt and budget deficit (Exhibit 6), inflation in this decade has been the lowest since 1930s.

Exhibit 4 – GDP Growth & Inflation


There is a reason the post-war period was nicknamed “baby boom” with strong population growth (Exhibit 5).  With a booming economy, there was plenty of work to go around leading to low unemployment rates.  Once more, 2010s have been a rather tough time to be looking for work.

Exhibit 5 – Population Growth & Unemployment Rate


Finally, the federal debt and budget deficit have seen major changes over the last few decades (Exhibit 6).  During World War II, the government borrowed heavily to support war effort, but slowly reduced the debt burden into 1970s.  The 1990s and 2000s saw a relatively stable debt load, but it increased markedly after the “Great Recession”.  Similarly, current budget deficits are quite high by historical standards (although last few years have trended down).

Exhibit 6 – Federal Debt and Budget Deficits


This piece is meant to put current environment into historical perspective and is something I will likely refer to quite a bit in future posts as well as my work with clients.

A few words about methodology:

Depending on the data series being cumulative or oscillating, some averages were calculated as geometric means or CAGR (S&P 500 Return, Real GDP Growth, Inflation, Population Growth),  while others are arithmetic means (10 Year Treasury Rate, Unemployment Rate, Debt to GDP, Budget Deficit to GDP).

2013 Review: Economy Edition

The last two weeks I reviewed investment performance in 2013 (2013 Review: Significant Events and 2013 Review: Asset Class & Sector Edition).  This last post in the annual review series will focus on economic indicators.

The employment situation continued to improve in 2013 (Exhibit 1).  The U.S. economy added 2.18 million new jobs (182,000 a month), slightly fewer than 2.19 million in 2012.  Total employment increased 1.6% which was better than 1.0% population growth.  The unemployment rate ended the year at 6.7% in December, the average of monthly rates was 7.4%.  U-6 rate is a broader measure defined as “Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons”.

Exhibit 1 – Employment


GDP growth slowed in 2013 (based on first three quarters) (Exhibit 2).  Auto sales, another metric of economic health, increased 6.8% approaching 16 million a year.  Inflation, as measured by Consumer Price Index, stayed very benign and decreased for the second year in a row.  This combination of slowing growth and mild inflation would argue for continued support from the Federal Reserve.

Exhibit 2 – Growth & Inflation


Public debt increased to $16.7 trillion during the year (Exhibit 3).  On the positive side, a combination of tax hikes and spending cuts (sequester) led to a big drop in budget deficit.  It declined by 37% to $680 billion to about half of what it was in FY 2011.  The Federal Reserve expanded its balance sheet by over a trillion dollars to $3,759,000,000,000 (that’s a lot of zeros!).  Average monthly increase was about $90 billion, which is in-line with its official QE pace of $85 billion a month.  The purchases have been “tapered” to $75 billion beginning in January 2014.  We’ll do a separate post analyzing Fed balance sheet in more details.

Exhibit 3 – Debt & Deficit


S&P 500 earnings growth accelerated to 10.7% (Exhibit 4).  However, most of the strong index performance in 2013 came from P/E multiple expansion, which increased by 17% to 17.2x from 14.7x.  Both 10-Year Treasury rate and 30-Year Fixed Mortgage rates increased from record-low levels.

Exhibit 4 – Earnings & Rates


Finally, the housing sector continued its slow healing process (Exhibit 5).  While still nowhere near prior peaks, both unit numbers and prices improved again in 2013.

Exhibit 5 – Housing


All of these data and MUCH more are available for free at  This is a great resource for investors and financial planners who like to do their own homework instead of relying on whatever sensationalized datapoints the media choses to focus on.

I plan on taking a closer look at many of these metrics in future posts.