Month: Nov 2009

The ageing of the USA, Part Two

Back to the future – a new way of seeing forward

Part Two of a three-part paper previously published by Professor Sherry Jarrell, Part One is here.

In this post, we examine the current income and spending patterns from metropolitan statistical areas (MSAs) with age demographics similar to those projected for the U.S. economy in 2020 and 2025. Two MSAs are selected for each year to verify that differences in buying patterns across cities are because of differing age distributions, not peculiarities in the cities.

We began with U.S. Bureau of Census data on the percent of total U.S. population expected within five age groups through 2025. The share of U.S. population attributed to people age 65 and older is expected to increase from 12.4% today to 16.3% in 2020 and 18.2% in 2025. By 2025, nearly one out of every four drivers will be age 65 or older, compared with 15.6% today.

Income and Spending Patterns

We find that, although many mature adults are highly mobile, most stay put; this results in the Northeast and Midwest remaining key mature markets. Three of our four 2020 and 2025 MSAs are in Ohio, New York, and Pennsylvania. We also find that older consumers:

spend more of their income: The spending per income ratio rises from .67 today, to .76 for the 2020 MSAs and .77 for the 2025 MSAs.

continue to depend on their cars and prefer them to public transportation.

spend increasingly larger shares of their income on healthcare.

make TV a key element of their lifestyles.

remain in their homes and avoid nursing homes.

are politically conservative.

are civically active and wield growing influence.

are joiners.

spend heavily on housekeeping supplies, household furnishings and equipment, new vehicles, entertainment, computers, healthcare products, vitamins, healthier foods, and reading materials.

spend less on apparel, cosmetics, and fast food.

We find that the percent of retail spending on necessities such as products at food and beverage stores and the subcategory of grocery stores is generally higher in all six of our MSAs, compared with the nation. The same is true for the general merchandise store category, which includes discount stores. We also observe generally lower spending shares relative to the nation in the more discretionary categories of clothing and accessories stores, furniture and home furnishings stores, electronics and appliance stores, building materials stores, and garden equipment stores.

The more important observations relate to spending patterns across the three pairs of MSAs. Looking at food and beverage stores, spending as a share of total retail sales declines across the three pairs of MSAs with increasingly older populations. Beginning with an average of 17.2% in the 2005 MSAs, spending at food and beverage stores drops to 14.1% in the 2025 MSAs.

Similarly, the subcategory of grocery stores falls from 15.1% today to 12.2% in the 2025 MSAs. Note that the approximately 3 percentage point declines in these categories are in spending relative to total retail sales, and that within the categories, the decreases in spending are nearly 20%. For example, for every $1,000 in retail spending in the 2005 cities, approximately $151 is spent at grocery stores. That compares with $122 in the 2025 cities. Thus, although spending shares at food and beverage stores are higher than the national average in all six MSAs, the spending shares fall across the three pairs of MSAs as their populations become increasingly older.

The trend also is downward over time for food service and drinking places, from an average of 9.7% in the 2005 MSAs to 7.5% in the 2025 MSAs—with the trend again representing a roughly 20% absolute dollar spending decline per capita within the category. These results support the expectation that older consumers eat healthier and in less quantities (especially in the case of fast food), and also spend fewer dollars at drinking places.

Per capita spending at clothing and accessories stores decreases from an average of 4% of retail sales in the two 2005 cities to 3.2% in the 2025 cities. As before, although the 1% drop appears small, it represents an approximately 20% reduction in per capita spending.

What types of stores benefit from older populations?

Our results indicate increased spending on furniture, automobiles, and homes. Looking at the per capita shares of total retail spending for furniture, home furnishings, and electronics and appliances, spending shares rise from an average of 2% in the 2005 MSAs to 3.9% in the 2020 MSAs and 4.2% in the 2025 MSAs. This suggests a doubling of per capita spending at furniture and related stores. There are similar patterns for the subcategories of furniture and home furnishings stores, and electronics and appliance stores. Spending also generally rises at building materials and garden equipment stores. Upward trends across the six cities additionally are shown for motor vehicles and parts, and healthcare and personal care.

In the third and final installment of this research, we will discuss the specific types of business establishments that will thrive in the U.S. city of the future.

By Sherry Jarrell

Goldman Sachs – doing God’s work!

A fascinating and revealing interview in the Sunday Times.

This article in the British Sunday Times was published on November 8th and I’m sure many will have read it. But for those that didn’t it really is worth settling down to a reasonably long read. For you will learn that Goldman Sachs:

It’s the site of the best cash-making machine that global capitalism has ever produced, and, some say, a political force more powerful than governments. The people who work behind the brass-trim glass doors make more money than some countries do. They are the rainmakers’ rainmakers, the biggest swinging dicks in the financial jungle. Their assets total $1 trillion, their annual revenues run into the tens of billions, and their profits are in the billions, which they distribute liberally among themselves. Average pay this recessionary year for the 30,000 staff is expected to be a record $700,000. Top earners will get tens of millions, several hundred thousand times more than a cleaner at the firm. When they have finished getting “filthy rich by 40”, as the company saying goes, these alpha dogs don’t put their feet up. They parachute into some of the most senior political posts in the US and beyond, prompting accusations that they “rule the world”. Number 85 Broad Street is the home of Goldman Sachs.

The world’s most successful investment bank likes to hide behind the tidal wave of money that it generates and sends crashing over Manhattan, the City of London and most of the world’s other financial capitals. But now the dark knights of banking are being forced, blinking, into the cold light of day. The public, politicians and the press blame bankers’ reckless trading for the credit crunch and, as the most successful bank still standing, Goldman is their prime target. Here, politicians and commentators compete to denounce Goldman in ever more robust terms — “robber barons”, “economic vandals”, “vulture capitalists”. Vince Cable, the Lib Dem Treasury spokesman, contrasts the bank’s recent record results — profits of $3.2 billion in the last quarter alone — and its planned bumper bonus payments with what has happened to ordinary people’s jobs and incomes in 2009.

and later on in conversation with the Chairman and CEO, Lloyd Blankfein:

“Is it possible to have too much ambition? Is it possible to be too successful?” Blankfein shoots back. “I don’t want people in this firm to think that they have accomplished as much for themselves as they can and go on vacation. As the guardian of the interests of the shareholders and, by the way, for the purposes of society, I’d like them to continue to do what they are doing. I don’t want to put a cap on their ambition. It’s hard for me to argue for a cap on their compensation.”

So, it’s business as usual, then, regardless of whether it makes most people howl at the moon with rage? Goldman Sachs, this pillar of the free market, breeder of super-citizens, object of envy and awe will go on raking it in, getting richer than God? An impish grin spreads across Blankfein’s face. Call him a fat cat who mocks the public. Call him wicked. Call him what you will. He is, he says, just a banker “doing God’s work”

Indeed!

By Paul Handover

The ageing of the USA, Part One

Back to the future – a new way of seeing forward

Part One of a three-part paper previously published by Professor Sherry Jarrell

Market research on the ageing of the U.S. baby boomer generation has focused on the spending habits of these older consumers. A new approach enables marketing researchers to observe the future now: Examine income and spending patterns from metropolitan statistical areas (MSAs) with age demographics similar to those projected for the U.S. economy in 2020 and 2025. With knowledge of these trends, they can begin preparing to meet the demands for particular products and services.

“Find a comfortable couch, lie back, and close your eyes. … Let your mind wander toward the future. Move, slowly, to the year 2030. Now open your eyes. What do you see? You see a country whose collective population is older than that in Florida today. You see a country where walkers outnumber strollers.” Laurence J. Kotlikoff and Scott Burns in The Coming Generational Storm (The MIT Press, 2004).

Projected Age Distribution, U.S. Bureau of Census data

There has been much speculation regarding the effects of the aging population on the U.S. economy. By the year 2025, more than 18% of the U.S. population is projected to be age 65 or older, greater than the percentage in Florida today. This has led some to describe the future of the United States as “a nation of Floridas.” Furthermore, the aging of the United States is not expected to pass with the demographic bulge produced by baby boomers (those born between 1946 and 1964). The U.S. population also is aging because of increased life expectancy and decreased numbers of offspring. As a result, current research projects that the U.S. age profile soon will transform from the current pyramid shape, with older groups at the top, to more of a barrel shape, with roughly 40% of the population divided fairly evenly between the youngest (under age 15) and oldest (over age 65) groups. This new profile will persist for decades.

Although much has been said about aging baby boomers leading to potential crises in Social Security and Medicare, we are more interested in the economic prospects of their retirement as they relate to consumer spending: in particular, whether they have saved enough to maintain their standards of living in retirement. In this regard, the Congressional Budget Office (CBO) reviewed studies from the past decade on the retirement prospects of aging Americans, and found evidence that varied with the standard used to define “enough.” Some studies defined it as the level that maintained the retiree’s working-age standard of living, whereas others defined it as levels that made the retiree as well off as his or her parents at the same age.

The picture that emerges from the CBO study is that baby boomers, relative to their parents at the same age, have higher real incomes, are preparing for retirement at the same pace, and have accumulated more private wealth. Furthermore, the savings behavior of baby boomers and other future retirees is dependent on their views of the health and stability of government benefit programs. If they believe that they will receive all of the government benefits they have earned, then they will tend to work and save less. If they believe that these programs are in trouble, then they might increase savings and postpone retirement.

What impact will changing age demographics have on future spending patterns? We obtain a more complete picture of future spending by observing aggregate spending patterns in local economies that resemble the future now: those cities where “walkers outnumber strollers” today. This novel research approach is based on actual observed data, rather than on speculation and long-term statistical forecasts, both of which are notorious for inaccuracy.

In the next post, we discuss our sometimes surprising findings on the spending patterns in the U.S. city of the future.

By Sherry Jarrell

WOMD

Mass Destruction?

No, it’s not weapons – I just wanted to get your attention; it’s “Words”. Last week two words of enormous significance crept into the news, and the first of them was the word “fair“.

This is a very interesting and potentially devastating word, but I wonder if the Minister was wise in letting it out of the box? Has he read the story of Pandora?

The word was used in connection with a report by British Schools Adjudicator Ian Craig, who had been asked by the British Labour government to look into the procedures and practice of admissions to secondary schools in Britain.

It seems that many parents, desperate to get their child into a good school, are devising ways to get round the strict allocation procedures put in place to ensure “fairness”. As has been brilliantly explained by Judith Woods in “The Telegraph” these desperate tricks include “using grandparents’ addresses on admissions forms for sought-after schools, renting homes in the catchment area, feigning marriage break-up and then reporting that one parent has moved nearer the school, and swapping houses with friends.”

According to Mr Craig – and the government – this is “cheating” and not “fair”, and the former is asking for local authorities to “use all means open to them to deter parents from cheating the admissions system. This includes removing places from the guilty and pursuing them through the courts, possibly using the Perjury Act.”

My interest here is not so much in the minutiae of the details of this current spat but the concept of “fairness” in society, which strikes me as pretty fundamentally complex.

It is of course a fairly modern concept, not one that much preoccupied Genghis Khan or even the Victorians, who were much happier with the principles outlined in this verse of the hymn “All things bright and beautiful”.

The rich man in his castle,
The poor man at his gate,
God made them, high or lowly,
And order’d their estate.

Interestingly, the concept is also one that is not often explicitly discussed by governments. I wonder if this is because the power and moneyed elite know that they might be on a sticky wicket in any discussion of “fairness”?

As ever, one cannot hope to find the answers until one has clearly posed the questions. So here goes:

Minister, as you have introduced into evidence the concept of fairness and labelled those trying to get round the school admission regulations as “cheats”, could you possibly answer these questions?

Is it fair that many families – desperate to provide a good education for their children – cannot afford to move to an area where there are good schools but are stuck through their limited means in an educational ghetto?
Is it fair that people can play the religion card and send their kids to a high-quality “faith” school outside of their catchment area, Tony Blair, former British PM, being the best recent example.
Is it fair that a substantial minority of parents don’t have to bother about finding a good state school at all since they can go private? (And shockingly, according once more to Judith Woods: “the advantage of being educated at an independent school is greater in Britain than in almost any other country.”)
Is it fair that many of the same substantial minority own multiple dwellings while hundreds of thousands of ordinary families do not own their own home and have to pay rent to someone, a system that seems to me to be a direct descendent of the feudal system where you slaved all day in return for the right to live on some Lord’s property? (Speaking of which – much as I love the Queen – is it fair that the small Royal Family owns vast, multiple dwellings that could house thousands of homeless people?)
Is it fair that poor person A should die of some horrible disease or disability while person B of limited means can pay for special treatment and survive?

And of course, the ultimate question: Is it fair that I wasn’t born with the voice of Elvis Presley and the brain of Albert Einstein?

Yes indeed; the concept of “fairness” goes far. Once you introduce it as a premise, then where do you stop? And either you base your government on “fairness” or you don’t. You can’t have your cake and eat it, can you?

I look forward in coming days to hearing more from Ministers – and indeed from readers – on the concept of “fairness”. One thing is sure to me, in a world of rapidly-increasing problems and people we risk hearing the word a lot more often as we struggle to find solutions which are “fair”. Of course, that assumes we think things should be “fair”.

Looking around, my conclusion is that we pretend to think it’s important but only if it doesn’t affect us too much personally.

Oh, the second Word of Mass Destruction? You’ll have to wait till next time …..

By Chris Snuggs

In the shadow of a rainbow

A truly magical experience between man and bear.

Regular readers of this Blog will know that Naked Capitalism is a daily read for this author. Yves Smith always includes her ‘antidote du jour’ picture of animals. How Yves finds these is beyond me but her antidote of the 14th November really was special. The original author of the piece, Tom Sears, is encouraging the distribution of his story and pictures and it’s a pleasure to do so via Learning from Dogs.

Black bears typically have two cubs; rarely, one or three. In 2007, in northern New Hampshire, a black bear Sow gave birth to five healthy young. There were two or three reports of sows with as many as 4 cubs, but five was, and is, very extraordinary. I learned of them shortly after they emerged from their den and set myself a goal of photographing all five cubs with their mom – no matter how much time and effort was involved. I knew the trail they followed on a fairly regular basis, usually shortly before dark. After spending nearly four hours a day, seven days a week, for more than six weeks, I had that once-in-a-lifetime opportunity and photographed them. I used the equivalent of a very fast film speed on my digital camera. The print is properly focused and well exposed, with all six bears posing as if they were in a studio for a family portrait.

bearfamilyadults

I stayed in touch with other people who saw the bears during the summer and into the fall hunting season. All six bears continued to thrive. As time for hibernation approached, I found still more folks who had seen them, and everything remained OK. I stayed away from the bears as I was concerned that they might become habituated to me, or to people in general, and treat them as `approachable friends’. This could easily become dangerous for both man and animal.

After Halloween, I received no further reports and could only hope the bears survived until they hibernated.

This spring, just before the snow disappeared, all six bears came out of their den and wandered all over the same familiar territory they trekked in the spring of 2007.

I saw them before mid-April and dreamed nightly of taking another family portrait, a highly improbable second once-in-a-lifetime photograph.

On 25 April 2008, I achieved my dream.

bearfamilybabies

When something as magical as this happens between man and animal, Native Americans say, “We have walked together in the shadow of a rainbow”. And so it is with humility and great pleasure that I share these exhilarating photos with you. Do pass them on!

By Paul Handover

Education, Literacy and Text-Messaging …

English Paper – Question 9, bmbl gr8 cu focl. Discuss!

Well, every day one learns something new and today I found out that British GCSEs (the state exams taken by pupils at age 16) will henceforth include a section on “text-messaging”.

Yup, you read it right … at a time when many employers are complaining that even university graduates cannot write and spell correctly we are going to spend time in secondary school practising for exam questions on text-messaging, or “the art of not writing proper English because it is so fiddly”.

text message speak

There are – sadly – so many idiotic things happening in Britain these days that one has sort of got inured, but this takes the biscuit. And the new courses will be not only on the messaging itself but on the “etiquette” of the art …… Am I living in a parallel universe?

What is the “etiquette” of text-messaging? The whole point about this form of communication is its anarchic, personal style. The internet and mobile phoning are two of the few areas of our life where we can communicate exactly as we like with whom we like. Why this OBSESSION with regulating everything? LEAVE IT ALONE!! And CERTAINLY don’t waste precious school time TEACHING how to text message “PROPERLY”.

And as for “PROPERLY”, WHO exactly is to decide? Ah, we need “norms” … we can’t have anything UNREGULATED after all, especially not in modern Britain. Better set up a commission, preferably at EU level and vast expense, with a President (Oh, they DO so love Presidents) to decide for us HOW to text message with “etiquette”.

When I read this I thought it must be April 1st, but “No”, it is serious …. Pupils “will have to write an essay on the etiquette and grammar of texting, using their own messages as examples – earning up to ten per cent of their overall English GCSE mark.”

But the best is yet to come. It seems that this new departure is “part of the Studying Spoken Language module intended to make GCSEs harder.”

“Harder”? Who wrote this garbage? How can anyone claim that and keep a straight face? And of course, once you have text-messaging on the syllabus and in the exam, then teachers will start to PREPARE for it …. precious time will be devoted to it in class …

“Plonkett – why are you on your mobile phone?”

“I’m just practising for my exam, Sir.”

“Oh, that’s all right then.”

The whole thing makes me despair actually. We are paying civil servants large amounts of money to come out with this nonsense. Many kids can hardly read and write now; apart from anything else it is a clear message that writing in textspeak is OK and that the other stuff is a bore.

“Studying Spoken Language”? If this is the aim, why not get kids to study speeches of great orators? Gandhi, Luther King, Churchill, Kennedy? Or even of some of the more eloquent current MPs? William Hague, Vincent Cable and so on? Study what they say? How they get their message across? Discuss and analyse their arguments? That would be fascinating, no? And the kids might at the same time learn something about how their society – and therefore lives – are governed.

Well, No – we have to have “text-messaging” ….

Sorry, our kids deserve better, and so does the British taxpayer.

By Chris Snuggs

Oh, and by the way, the answer to the question at the top of the post is: busting my brains laughing, great, see you, fall of chair laughing. DILLIGAS is all I can ‘say’.

The Moon and water!

NASA reveals that there is a significant amount of water on the Moon.

In a rather awful pun, NASA published update on the LCROSS Mission starts with the words, “The argument that the moon is a dry, desolate place no longer holds water.”

Anyway, the significance of the update is enormous. As the NASA release goes on to say,

Scientists have long speculated about the source of vast quantities of hydrogen that have been observed at the lunar poles. The LCROSS findings are shedding new light on the question of water, which could be more widespread and in greater quantity than previously suspected.

Permanently shadowed regions could hold a key to the history and evolution of the solar system, much as an ice core sample taken on Earth reveals ancient data. In addition, water, and other compounds represent potential resources that could sustain future lunar exploration.

The BBC also reports the NASA data but, I am bound to say, in a rather more reader-friendly format.

By Paul Handover

Reflecting on insider trading

Time to Reassess Insider Trading Rules?

On the face of it, prohibiting insider trading seems to be fair and reasonable.

US insider trading laws, refined over time in court on a case-by-case basis, define “trading on the basis of inside information” as any time a person trades while aware of material nonpublic information (US Securities and Exchange Commissions Rule 10b5-1, which also creates an affirmative defense for pre-planned trades.) SEC regulation FD (“Fair Disclosure”) also requires that if a company intentionally discloses material non-public information to one person, it must simultaneously disclose that information to the public at large; in an unintentional disclosure, the company must make a public disclosure “promptly.” Lastly, the Williams Act gives the SEC regulatory authority over insider trading in takeovers and tender offers.

Single-handed sailing

A personal reflection on this rather strange way of travelling!

The recent Post about young Jessica Watson sailing alone around the world raised a few comments but also reminded me of my own experiences of solo sailing.

Some years ago, having successfully sold my own IT company, I warmed to the idea of being a full-time yachtie! A second-hand Tradewind 33 was discovered on the Island of Corfu. (Now here’s a surprise! I was just browsing the web looking for a picture of a Tradewind and came across my old yacht currently up for sale. Her name is Songbird of Kent! Picture below.)

Anyway, the deal was done and having sold my house in England I flew out to Corfu to collect Songbird of Kent. Inevitably it was a number of months before the boat was ready to head out into the Mediterranean but in early Spring 1988 it was time to explore the long coastlines of Greece and Turkey.

After a fantastic summer cruising from one idyllic anchorage to another mostly with friends or family on board, it was time to find a winter haven. Many recommended Larnaca Marina in Cyprus. Thus it was late in the summer of 1988 that I said goodbye to friends and set out on my own to cross from Antalya in Turkey to Cyprus and for Larnaca, on the SE side of the island.

That sea crossing, only a little over 200 nautical miles, was to become a regular solo experience at the start and end of each summer season. Impossible to do in a single day it was always a night at sea and rarely, if things didn’t go well with the weather, a couple of nights. I hated it! Maybe it was the sudden transition from coastal sailing to a deep water crossing, often going from having friends on board to being alone, but whatever it was I never enjoyed my time on my own and knew that long-distance solo sailing was never going to be my scene.

Remarkable people: Benjamin Zander

Music is his base

Very few people demonstrate and explain the benefits of responding positively to the world around us as effectively as Benjamin Zander. The Boston Philharmonic Orchestra is “semi-professional”, which means that it is a volunteer orchestra who play to professional standards. He has conducted the orchestra for 30 years; and his standing as a professional cellist and conductor is without question.

Leadership is his forte

But his contribution as a musician is exceeded by his contribution as a speaker on leadership.

He combines speeches on leadership with his musical performances and has given keynote speeches at the World Economic Forum on at least four occasions.

In the book ,”The Art of Possibility”, which he co-authored with his partner Rosamund Stone Zander, they relate the following moving story.

A New Children’s Story

A little girl in second grade underwent chemotherapy for leukaemia. When she returned to school, she wore a scarf to hide the fact that she lost all her hair. But some of the children pulled it off, and in their nervousness laughed and made fun of her. The little girl was mortified and that afternoon begged her mother not to make her go back to school. Her mother tried to encourage her, saying. “The other children will get used to it, and anyway your hair will grow in again soon.”

The next morning, when their teacher walked in to class, all the children were sitting in their seats, some still tittering about the girl who had no hair, while she shrank into her chair. “Good morning, children, “ the teacher said, smiling warmly in her familiar way of greeting them. She took off her coat and scarf. Her head was completely shaved.

After that, a rash of children begged their parents to let them cut their hair. And when a child came to class with short hair, newly bobbed, all the children laughed merrily – not out of fear – but out of the joy of the game. And everybody’s hair grew back at the same time.

Isn’t that wonderful?

Contrast that with the narrow thinking behind a recent incident at at school in the Australia when a child shaved her head to raise money for a charity in support of her father’s illness. She was barred from the school. The story is described here.

How daft is that? As others have asked, what would they have done if a pupil had lost her hair as a result of chemotherapy?

Sometimes you might wonder whether we live on the same planet!

Take time to watch …

If you are not familiar with Benjamin Zander’s presentation, then this is an uplifting experience. For example, this presentation (of more than an hour) was given at the World Economic Forum 2009 (and never mind the image quality, it is good enough!):

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Music is his base

Leadership is his forte

Take time to watch …

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