Business models have to change as BabyBoom dividend ends
on July 6, 2015

Perstorp May15

Major change is underway in the global economy:

  • Global GDP has grown 10-fold over the past 60 years; life expectancy has risen by 20 years; average time in education has risen from 3 yeas to 8 years; 70% of the world now has access to the internet
  • Today, the scale of technological change means 40% of existing job categories are likely to disappear over the next 20 years; climate change and inequality are moving up the political agenda;  the trend towards globalisation is reversing, political risk is rising, and we are moving towards a more fragmented world

This was the analysis presented by the former head of Britain’s MI6 secret intelligence service, Sir John Sawers, to investors at the annual EuroMoney Global Bond Investors Conference.

Of course, we can disagree with parts or all of his analysis, but it would seem unwise to ignore it completely.  He argued that complacency was one of the greatest dangers that we faced.  And he suggested that investors and companies needed to accept that complexity and uncertainty will be with us for the foreseeable future:

“It would be most unwise to simply keep our heads down, and assume today’s problems will somehow disappear.  Instead, business strategy needs to focus on the key issues, and develop relevant scenarios to prepare for whatever may happen”.

I have spoken at the EuroMoney Conference in the past (click to see my interview), and share Sir John’s concerns.

One key issue is “Why did this remarkable development take place in the global economy over the past 60 years?”   The answer has to be the unprecedented change that took place in global demographics, with the arrival of the Western BabyBoomers after WW2 – the largest and wealthiest generation that the world has ever seen.

Now we are leaving behind this demographic dividend, and moving into a world of demographic deficit, due to the collapse of fertility rates around the world.  We have relatively fewer people in the peak income and spending 25 – 54 age group.  Instead, for the first time in history, we have a whole generation of people in the low-spending, lower income 55+ age group – and they have 20 years or more life expectancy ahead of them.

The Swedish company, Perstorp, kindly invited me to discuss this outlook with their guests at their Grand Opening for their new OXO plant in Stenungsund.  And afterwards, we filmed a short 2 minute interview, where I discussed the highlights of my analysis.

Please click here if you would like to see it.

WEEKLY MARKET ROUND-UP
My weekly round-up of Benchmark prices since the Great Unwinding began is below, with ICIS pricing comments: 
Brent crude oil, down 41%
Naphtha Europe, down 41%. “The market remains divided on the outlook for demand from downstream European and Asian petrochemical industries”
Benzene Europe, down 41%. “The market in Europe is likely to slow down over July and August due to the holiday season,”
PTA China, down 31%. “Bearish sentiment remained in the market for the months of July and August, as producers do not see any upticks in demand for PTA”
HDPE US export, down 19%. “Export prices remained stable, though there were sources who reported spot prices slightly lower.”
¥:$, down 20%
S&P 500 stock market index, up 6%

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