Wisdom on Value Investing: How to Profit on Fallen Angels Summary - Chapter 10

The Science of demographics

·         Take a glimpse into the future by studying the science of demographics:

a.       Human beings do predictable things as they age.

b.      If you look at the history of stock market or real estate bubbles, they have frequently coincided with demographic shifts.

c.       As people age, their spending habits change. People in their 20s have different priorities, and differing spending patterns, than people in their 30s, 40s, 50s, and 60s and beyond.

d.      When people reach and surpass their peak spending years, the economy slows down, because older people are not generally interested in buying more stuff or in putting their capital at risk.

e.       The peak spending years is around age 48.

f.       If demographic theories hold true – and they have in the past – the U.S. economy may be in for a prolonged period of slowing as the baby boomers age and pass their peak spending years.

g.      Income-oriented (i.e., dividend paying) securities could be at the very beginning of a 20-year-long bull market due to the aging trend.

h.      Although the population of the U.S. is steadily aging, we may escape the devastating deflationary spiral that has plagued Japan thanks to immigration.

·         It’s virtually impossible for even the most knowledgeable and disciplined investor to avoid all risk. What you can do though is manage risk by avoiding permanent loses; there is where timeliness comes in.

The System that help you to keep your head when market is losing its mind