Weekend Reading: The Fourth Turning

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Last week, I interviewed the author of “The Fourth Turning”, economist and demographer Neil Howe on “The Lance Roberts Show.” The discussion focused on the demographic shift that is currently occurring in the United States and the impact it will have on economics in the future. One of the most striking points of the discussion is how American’s are acting in many of the same ways they did during “The Great Depression.”  Also, he delves into the coming crisis in the next decade that will change the landscape of how American’s think and behave in the future.

You can listen to the full interview by clicking here.

I bring this up because just after I had the interview with Neil, it was Stanley Druckenmiller to point out many of the same issues.

The disaster that Druckenmiller sees coming for the United States is all about changing demographics and entitlement spending. The same problem Neil Howe pointed out.

In 1940, entitlement payments, which include everything from disability payments to Social Security to Medicare, amounted to just over 20% of annual government spending in the United States.  Today, entitlement spending has swelled to nearly 70% of the annual federal budget.

With the 20-year baby boom that took place after World War II now beginning to result in a retiree boom, the demographic trend is going to create an entitlement spending catastrophe.

Since 1980, the number of working-age people the country has had has outnumbered those age 65 and over by a count of 5-to 1. In other words, the country had enough workers to generate the tax revenue to support the number of retirees.  By 2030, that ratio is going to drop to 2.5-to-1.

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I think you will find the interview very interesting if you are a long-term investor.

Looking to the markets, if you like volatility you had to love this week with the markets dropping 22 points on Tuesday, rising 21 points on Wednesday and dropping almost 25 points on Thursday. That kind of volatility should come with a dose of “Dramamine.”  The question now is whether all of the Federal Reserve “jaw boning” will continue to elevate stock prices higher as we head into what will most likely be a very rough earnings season. As John Hussman tweeted yesterday:

As I discussed last week, with the month of April winding up the seasonally strong time of the year, earnings season just ahead and economic growth weak, the risks to the downside far outweigh “hope” of higher prices.  Or, is “bad news” still the a bear market deterrent?


CENTRAL BANKING


MARKETS & EARNINGS


ECONOMY & OIL 


OTHER GOOD READS


“The typical investor has usually gathered a good deal of half-truths, misconceptions, and just plain bunk about successful investing.” –Philip A. Fisher

Questions, comments, suggestions – please email me.

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Lance Roberts

Lance Roberts is a Chief Portfolio Strategist/Economist for Clarity Financial. He is also the host of “The Lance Roberts Show” and Chief Editor of the “Real Investment Advice” website and author of “Real Investment Daily” blog and “Real Investment Report”. Follow Lance on Facebook, Twitter, and Linked-In

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