Tuesday, July 17, 2018

Working til you're 100? Yeah, about that....

BBC - what if we all have to work til we're 100? Yeah, about that:

There’s a sizeable gap between the amount that most people are saving towards their retirement, and the amount that they’re likely to need. It’s growing every day. According to a recent report by the World Economic Forum (WEF), people living in some of the world’s largest economies – the US, UK, Japan, Netherlands, Canada, Australia, China and India – collectively face an eye-watering $428 trillion savings hole by 2050.

So the World Economic Forum, besides being the organizers of the Dav(r)os event, must also be a group of fucking morons.

The reason I say this is that the supposed $428T shortfall is close to the total wealth of the planet. All publicly-traded world equities total $100T, private business is maybe another $100T, there's maybe $100T in bonds, gold is a pittance, and world real estate is about $250T - all figures plus-or-minus a huge margin of error.

Savings has to be invested in something that pays a return. So, if all the rich countries' old people suddenly had an extra $428T to cover their lifetime savings shortfall, that $428T would have to be invested in debt, equity, and real estate: things that pay a return.

But there would be no extra investment in production, because that extra $428T in savings would not cause any change to consumption demand.

So, that $428T would be invested in existing businesses, equities, and bonds, which would mean a UST10Y yield of maybe 1.5% and a US market forward P/E of over 30.

Neither of which can happen sustainably.

In any case, since it's Davros suggesting this number, it probably assumes that all old people in rich countries want to spend $100,000 a year on fucking caviar and fine wines, instead of complaining about how you can't any longer buy buttwipe for under $4 a pack.

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