How Do We Know All This?

America reaches a crossroads. Economic fundamentals, market cycles and demographic trends are converging that threaten the future economic prosperity to which we Americans have grown to be accustomed. The mix of SENIORS passing their peak spending years, an archive amount of Americans retiring along with a government in crises over how exactly to shell out the dough, is brewing up a storm of epic proportions that may affect how you live. Few will dsicover it coming, but the ones that are ready will prosper, while the ones that aren’t will endure tremendous financial and personal hardship. Your ability to earn money and ultimately the right path of life be determined by you being ready for the ensuing Economic Tsunami, this Perfect Storm. Soon, the 78 million seniors will pass their peak spending years and go to retirement. It’s a significant time because America is really a nation driven by consumer spending. Personal consumption, or what folks do as consumers, represents over 70% of the country’s Gross Domestic Product (GDP) and exactly how people as consumers spend their money may be the largest influence on our economic health.

How do we realize all of this?

Economic boom times are connected with a growing size of the mid-forties population, because this is actually the age people spend probably the most, and bust times are of a decreasing size of the population. As larger sets of consumers age and save money, the economy grows. When you see within the charts above, people spend cash in very predictable patterns, at very predictable times within their lives. These spending patterns directly impact our economy, business and product trends. From the demand for poker chips and property to inflation rates, economic growth, immigration rates, and domestic migration – locally, nationally and globally are affected. By analyzing these details we are able to successfully forecast how spending changes within the years and decades ahead. Economists will continue steadily to fret concerning the “over-extended” consumers plus the dire consequences ahead, nevertheless the boom in consumer spending will continue until SENIORS see their children finish their senior high school years and re-locate. How do we realize all of this? Demographics target the finer segments of consumers by age, income and lifestyles completely right down to zip codes and neighborhood blocks.

It predicts what new generations of consumers can do because they age, also it can similarly help us see key trends which will affect our future decades beforehand. The life span insurance industry was the first ever to utilize this data for actuarial predictions, to assess risk when making life insurance coverage policies. The analysis of how demographics may be used to predict currency markets trends was pioneered by renowned economist Harry S. Dent Jr., founder from the “Dent Method”, an economic forecasting approach that applies fundamental demographic trends to key economic factors. Dent gets the only documented record of success at forecasting longterm economic trends. Once we see in charts 1 & 2, people do predictable things because they age. Between 18-47 we proceed through several stages of life. From just entering the workforce at 18-22 years, to engaged and getting married between ages 22-30, the spending cycle is accelerated from the apartments and new stores these new households generate.

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Children soon follow and we then purchase our first home from about ages 31-42 – the stage of which we incur probably the most debt – and purchase the most poker chips because your 14-year old is eating you from house and home. Our spending continues to improve once we purchase our next home, more furnishings and cars, etc. until about age 47 as our children reach their late teenage years and so are still surviving in the household. Once we reach 50 the youngsters leave home. At this time, after that dream car at 54 plus the expensive wine at 56, we commence to spend less, paying off debts, and saving more for retirement. After age 50 we have a tendency to reduce spending for the others of our own lives, allowing growth in savings and investments. Income doesn’t decrease, but spending usually does. The peak rate of investment generally occurs at age 54, which continues into retirement at around age 63. Net worth typically peaks soon after age of death, currently 78. With quantifiable data on every one of the key things we do once we age, trends are largely predictable decades in to the future – locally, nationally and globally!

Consider the next events that appeared as if they might seriously derail the economy, but couldn’t! These disasters and threats aren’t that which we base our spending decisions on. Families have needs that must definitely be looked after whatever the market conditions. This and stage of life determine spending patterns. Once we undertake stages of life which correspond with different ages, we change our spending in very predictable ways. What we should buy at each stage is predictable and consistent. These details may be used to forecast how spending changes within the years and decades ahead. To start to see the actual spending stages of the populace, we must go through the Adjusted Birth Index. Spending cycles could be forecasted by continue the birth index (adjusted for immigration) by the correct amount of yours to correlate with how big is the late forties population. If we plot how big is the late forties generation using the projected year, we start to see the rising trend of peaks and troughs in spending because of past variations in birth and immigration rates (Chart 3). For instance, fewer babies were born through the Great Depression than either before or afterward.