Have the Western Democracies peaked?

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Shakespeare
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Have the Western Democracies peaked?

Post by Shakespeare »

With a Brexit possibility and the rise of Trumpism in the US, there seems to be in many Western countries a growing sense of anger combined with anti-free-trade sentiment as jobs are exported to cheaper countries and there is a sense of economic stagnation in the middle class, combined with resentment towards poorer countries (and their workers) an towards the very rich. It seems to me that the protectionism and nationalism that results has some unpleasant similarities to the rise of protectionism in the 1930's, and may well herald an era of slower growth and poor investment returns.

We also have, at the same time, a rise in artificial intelligence capability:

42% of Canadian jobs at high risk of being affected by automation, new study suggests - Business - CBC News

Youth unemployment is high, and jobs are scarce. (Us old folks are relying on youngsters to pay our pensions!)

What are the investment/asset allocation implications, if any?
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Re: Have the Western Democracies peaked?

Post by ghariton »

You mention the Great Depression of the 1930s. But there have been other tense periods since, albeit not as bad. Take the late1960s and early 1970s. U.S. city after U.S. city was going up in flames as a result of race riots and anti-war protests. In France, a coalition of students and students were trying to overthrow the government by violent means. Trust in governments and in institutions more generally had evaporated. Richard Nixon narrowly escaped impeachment and Spiro Agnew had to resign. Politicians across the board were landing in jail, including yje Governor of the state I lived in, New Jersey.

In Canada we had the FLQ crisis. In the world more generally there was still the very real threat of thermonuclear war. The economy was doing badly, on its way to stagflation, a word that probably needs defining for younger audiences.

And yet, investments in equities did all right. There were ups and downs, and a long period of stagnation after the 1966 peak. but values eventually recovered and forged ahead. Trying to duck the troubles, or take refuge in safer asset classes, would have been a mistake.

The past is a weak predictor of the future, but unfortunately it's the best one we have. If so, that points to staying invested in a broadly diversified portfolio of equities. (100 per cent VT :wink:)

If I were to [ick individual investments. I might look at companies likely to benefit from automation. (Automation, not foreign workers, or deficient demand, is the biggest threat to Canadian jobs,) Google, Apple, Amazon, and so on. They're not cheap, but that's for a good reason.

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Re: Have the Western Democracies peaked?

Post by Spidey »

I think what we are witnessing is the growth/decline that has been present throughout history. The following quote sums it up pretty well.
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For those who don't know, Stoic philosophy is based on virtue while Epicurean philosophy emphasizes pleasure.
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Re: Have the Western Democracies peaked?

Post by ockham »

I was earlier this week thinking to dust off my yellowing copy of Joseph Schumpeter's "Capitalism, Socialism, and Democracy" to review Schumpeter's concept of capitalism's "creative destruction." Perhaps there's some guidance to be found there.

https://en.wikipedia.org/wiki/Joseph_Schumpeter

I have in the past five years traveled through large swathes of the US mid-west and north-east. A way of life is dying.
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Re: Have the Western Democracies peaked?

Post by Shakespeare »

The UK peaked well before WWII, although that was not obvious to most. After WWII, with Labour and Austerity, many people left, emigrating to Canada, Australia, NZ, and South Africa. We came to Canada in 1955.

Where will the Americans go?

[The SF answer is "space". But it is not clear it will ever be cheap enough.]
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Re: Have the Western Democracies peaked?

Post by JaydoubleU »

Some things will never change, regardless.

We will always need to eat, and we will always die.

Agriculture is one sector that may experience growing automation, but the demand for food will remain constant or grow with population growth. I like the agricultural sector as a long-term secular investment theme.

Climate change is a big one, and anyone paying attention has noticed that renewable energy has fallen so far in cost that it is now competitive with fossil fuels. It will take time, but I'd say that if you fell asleep and woke up 30 years later, you'd be shocked to see that most cars are electric, and electric refueling stations are everywhere.

I watched a lecture by the historian Gwynne Dyer some years ago about some of the effects of climate change. It wasn't pretty. According to Dyer, authorities in developed countries are already preparing for mass migrations of peoples north and south as they leave uninhabitable areas closer to the equator. Look for increasing conflict over water resources and arable land.

Populations in most developed countries are aging. There are all sorts of ways to play this, from healthcare to private old age homes, or even, as suggested above, through funeral homes. Not sure if there are any publicly traded companies that cater to the needs of older folks who choose to remain at home, but I can see a lot of business growing there--my own parents hire people to clear the snow, cut the grass, wash windows; one day they may hire a service to run messages such as pick up groceries or prescriptions.
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Re: Have the Western Democracies peaked?

Post by hamor »

Gloom and doom again, love it.
I can't say anything useful about investments and asset allocation, sorry.
Except, the only asset holding its value through centuries is real estate, but it's about location, right?
I mean who wants to live in the mid west, be it Canadian or American, unless there's oil there...
Where I live in GTA suburb, it's not even funny. Houses went up about 300% in under 10 years. I don't have the stats, but looks like wealthy Chinese (imported $$$) are driving up the prices.
Where will the Americans go?
nowhere, obviously, at least most of them.
Globalization is leveling the playing field or flattening the world.
Billions live a bit better today, than they did 10 years ago, millions in the West live a bit worse...

The usual principles apply,e.g. diversification, if one believes in the world economy, one must stay invested in financial markets. Direct exposure to emerging markets is usually risky, so buying global co, must be the way..? Income generating instruments are the hardest part today, eh?
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Re: Have the Western Democracies peaked?

Post by JaydoubleU »

Where will the Americans go?

NORTH to Canada. A few might flee a Trump presidency, but not many. Unless of course he starts a war, in which case there could be more . If Dyer is correct, Americans will be gradually migrating north just to escape perpetual droughts, heat waves, rising ocean levels.

This is from Wikipedia: https://en.wikipedia.org/wiki/Canada_an ... ietnam_War
Starting in 1965, Canada became a choice haven for American draft dodgers and deserters. Because they were not formally classified as refugees but were admitted as immigrants, there is no official estimate of how many draft dodgers and deserters were admitted to Canada during the Vietnam War. One informed estimate puts their number between 30,000 and 40,000.[8] Whether or not this estimate is accurate, the fact remains that emigration from the United States was high as long as America was involved militarily in the war and maintained compulsory military service; in 1971 and 1972 Canada received more immigrants from the United States than from any other country.
And not only draft dodgers, but,
Estimates of the total number of American citizens who moved to Canada due to their opposition to the war range from 50,000 to 125,000[11] This exodus was "the largest politically motivated migration from the United States since the United Empire Loyalists moved north to oppose the American Revolution."[12] Major communities of war resisters formed in Montreal, the Slocan Valley, British Columbia, and on Baldwin Street in Toronto, Ontario.
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Re: Have the Western Democracies peaked?

Post by Thegipper »

hamor wrote:Gloom and doom again, love it.
I can't say anything useful about investments and asset allocation, sorry.
Except, the only asset holding its value through centuries is real estate, but it's about location, right?
I mean who wants to live in the mid west, be it Canadian or American, unless there's oil there...
Where I live in GTA suburb, it's not even funny. Houses went up about 300% in under 10 years. I don't have the stats, but looks like wealthy Chinese (imported $$$) are driving up the prices.
Where will the Americans go?
nowhere, obviously, at least most of them.
Globalization is leveling the playing field or flattening the world.
Billions live a bit better today, than they did 10 years ago, millions in the West live a bit worse...

The usual principles apply,e.g. diversification, if one believes in the world economy, one must stay invested in financial markets. Direct exposure to emerging markets is usually risky, so buying global co, must be the way..? Income generating instruments are the hardest part today, eh?
Yes Wynne by some miracle has made Ontario a fantastic place. At what cost? Big time subsidized green energy and a 300 hundred billion dollar plus debt and billions more in unfunded and contigent liabilities. The chickens are coming home to rest. Why didn't you move to Vancouver ? Your return looks paltry compared to that market and you don't freeze your ase in the winter.
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Re: Have the Western Democracies peaked?

Post by ghariton »

Shakespeare wrote:The UK peaked well before WWII, although that was not obvious to most. After WWII, with Labour and Austerity, many people left, emigrating to Canada, Australia, NZ, and South Africa. We came to Canada in 1955.
Previous migrations were largely driven by the need for arable land to accommodate a growing population and very little productivity growth in agriculture. Current migrations seem to be driven by the avoidance of war and other forms of violence.

We've solved the agricultural problem for now, assuming we come to our senses on GMOs. So no need for vast expanses of "new" land. As Steven Pinker has documented, somewhat controversially, world-wide violence is also in long term decline. Future migration may still be driven to some degree by refugees, especially from the Middle East (a disaster that has just started unfolding), but mainly by the desire to improve one's economic situation. Countries with strong safety nets will be particularly attractive destinations. That would be Europe, Canada and, to some degree, the U.S.

Global warming will be a problem, in that it will affect production in various sectors. But we will be developing mitigation measures that we haven't even thought about yet, As a result, I don't see much migration as a direct result of global warming. Rather, we will stay where we are and learn to cope.

As I said above, in light of all the uncertainty, my first choice is a very broadly diversified portfolio of equities, Bur if U had to pick targeted investments, I would look to companies who might by successful in mitigating the effects if global warming. I would also look to companies who will furnish the tools for automation -- so that we can all stay in out domed air-conditioned cities and not worry about what is happening outside :wink:

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Re: Have the Western Democracies peaked?

Post by Shakespeare »

Previous migrations were largely driven by the need for arable land to accommodate a growing population and very little productivity growth in agriculture. Current migrations seem to be driven by the avoidance of war and other forms of violence.
The post-WWII British migration was not driven by arable land, but by poor and stagnant living conditions. Rationing continued under Austerity, and the rations were even reduced as Labour introduced expensive reforms (many needed) and several silly policies that were later reversed. Although the situation had eased by 1955, my parents looked at both Canada and Australia before coming here.
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Re: Have the Western Democracies peaked?

Post by izzy »

"Plus ça change, plus c'est la même chose!!"
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Re: Have the Western Democracies peaked?

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hamor wrote:I don't have the stats, but looks like wealthy Chinese (imported $$$) are driving up the prices.
Nobody seems to have the stats. And yet the paucity of data seems to do little to discourage xenophobes from drawing a direct link to the scary, wealthy foreigners.
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Re: Have the Western Democracies peaked?

Post by kombat »

I think overpopulation is a large part of the problem. We've reached the point in globalization where outbreaks can spread worldwide in a matter of hours. People are panicking over things that would have been unheard of decades ago. Zika virus outbreaks, Ebola outbreaks, avian flu, SARS, you name it. There are too many of us, living too closely together.

People insist of creating recklessly large broods in areas totally unsuitable to agriculture. Then we're assaulted with heart-wrenching infomercials of children with distended bellies, in slow motion, over a Sarah McLaughlin ballad. Disease, real estate, hunger, climate change, overflowing landfills, the Pacific Ocean garbage patch, the destruction of the rainforests and coral reefs, it all comes back to overpopulation, in my opinion. My wife and I are doing our part, having cleaved our branch off the family tree (courtesy of Dr. Weiss in Ottawa). The rest of you are on your own.
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Re: Have the Western Democracies peaked?

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ghariton wrote: Global warming will be a problem, in that it will affect production in various sectors. But we will be developing mitigation measures that we haven't even thought about yet, As a result, I don't see much migration as a direct result of global warming. Rather, we will stay where we are and learn to cope.

As I said above, in light of all the uncertainty, my first choice is a very broadly diversified portfolio of equities, Bur if U had to pick targeted investments, I would look to companies who might by successful in mitigating the effects if global warming.
George
I agree with you re: the global warming bugaboo, mitigation is the way it will go (if required - I have no doubt the globe is warming, but I am still dubious about how bad a thing that really is).

Alas, right now "green energy"/reducing emissions is all the rage and where companies can extract the most profit from foolish governments. Nobody talks much about mitigation yet. Maybe by the 2030's after China has pumped out few million gigatons more carbon. And then what type of mitigation? Dealing with a warmer climate or trying to cool us off after the atmospheric carbon levels have reached a crisis point? I guess cooling mitigation would have to follow one of two paths - technology to extract carbon from the atmosphere or technology to dump excess heat into space. I don't think any companies are into that yet, but if I hear of any company producing large scale photonic radiative coolers going to IPO, I'll be all ears. :)
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Re: Have the Western Democracies peaked?

Post by Shakespeare »

I think overpopulation is a large part of the problem.
Fundamentally, yes. In the West it is exacerbated by underemployment. I suspect many Canadian youths will never get jobs.

This is a major problem, since they can only live off their parents or exhaust the estate for so long.
I guess cooling mitigation would have to follow one of two paths - technology to extract carbon from the atmosphere or technology to dump excess heat into space.
More likely is technology to reduce incoming energy - space sunshades, cloud generators, etc.

Added: If the politicians had guts, they'd set up a reforestation corps for the youth - with mandatory conscription. Solve two problems at once. :wink:
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Re: Have the Western Democracies peaked?

Post by Wallace »

Don't know whether this should be in the watercooler or here, but I will get to the investment part in a minute...

Problems with the European Union and the middle East are likely to dominate the political and economic scene for some time to come.

1. European Union. The EU is a massive experiment in centrist bureaucracy that has no precedent in government anywhere in the world - ever. Colonization, where multiple cultures are subverted under the umbrella of one dominant government, comes close. And as a former colony of Britain, Canada knows something about this. I don't think Brits want to be dominated by Brussels any more than Canadians wanted to be dominated by Britain. A friendly pact is ok . A parent-child relationship is not. Ditto for many other EU members who are also reconsidering this experiment.

2. Middle East. If democracy is going to spread around the world, it will do so by example and by slow absorption - not by force. Countries adjoining democracies will notice the better standard of living and will slowly change their policies to improve the lot of their citizens. The idea, prevalent in the 1990s, that if dictators were overthrown and elections established, people would choose democracy, has been shown to be a mistake of epic proportions. The massive refugee crisis, probably the worst the world has ever seen, is IMHO a direct result of the mistaken policies of the West. We assumed that we can make everyone think like us by overthrowing governments that do not live up to our "standards". I think that a hundred years from now historians will have caustic opinions of this and the paternal policies of the West.

Democracies in Europe are in serious danger. Elected leaders in Greece have been replaced by bureaucrats in Brussels. Elected governments in Egypt and the Ukraine have fallen. We cheered one and booed the other depending on where our loyalties lay, but what we were seeing was mob rule in action. Europe is very unstable right now, whether Britain opts in or out of the EU.

I would check all of my investments for exposure to Europe. I have some money in Britain that I will soon have to transfer to Canada. I won't be doing it before Thursday. Somehow I think that no matter what the result is, the bad news has already been factored in and I would expect Sterling to recover after the decision, whatever it is. I'll wait for that.
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Re: Have the Western Democracies peaked?

Post by hamor »

kombat wrote:...xenophobes from drawing a direct link to the scary, wealthy foreigners.
did you call me an x-word?
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Re: Have the Western Democracies peaked?

Post by Shakespeare »

I would check all of my investments for exposure to Europe.
I am reasonably happy with keeping my global holdings in VT, as George suggested. However, I wonder if a high equity exposure is now warranted, despite poor bond returns.

If I were to suggest increasing equity exposure in certain sections, it would be the defense/munitions industries....
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Re: Have the Western Democracies peaked?

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hamor wrote:did you call me an x-word?
You admitted you have absolutely no supporting statistics, then in the same sentence blamed one particular foreign nationality for driving up home prices.

The shoe fits.
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Re: Have the Western Democracies peaked?

Post by 2 yen »

ockham wrote:I was earlier this week thinking to dust off my yellowing copy of Joseph Schumpeter's "Capitalism, Socialism, and Democracy" to review Schumpeter's concept of capitalism's "creative destruction." Perhaps there's some guidance to be found there.

https://en.wikipedia.org/wiki/Joseph_Schumpeter

I have in the past five years traveled through large swathes of the US mid-west and north-east. A way of life is dying.
Same on Canada's east coast. With pockets of exception, the provinces are hollowing out, populations are declining and mother nature is reclaiming land - any drive through rural areas can confirm this. Some of the cities are bucking the trend.

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Re: Have the Western Democracies peaked?

Post by twa2w »

kombat wrote:
hamor wrote:did you call me an x-word?
You admitted you have absolutely no supporting statistics, then in the same sentence blamed one particular foreign nationality for driving up home prices.

The shoe fits.
What hamor said was hardly xenophobic. Look up the definition.
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Re: Have the Western Democracies peaked?

Post by Flaccidsteele »

Shakespeare wrote:Have the Western Democracies peaked?
Unlikely

As some have said, bad news is common all the time. Unless it causes a fat drop in asset prices, I don't pay any attention.
Shakespeare wrote:What are the investment/asset allocation implications, if any?
None for me. Still mostly invested in U.S. assets.
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Re: Have the Western Democracies peaked?

Post by Peculiar_Investor »

A gentle reminder of the forum rules might be in order.

As to the original question, it will be up to historians to figure out if/when a peak occurred. As an investor, I believe the prudent course of action is to maintain a diversified portfolio and follow my investment plan and ignore the daily/weekly noise. Nothing in recent events has given me pause to reconsider/change the plan, so I'm simply continuing to execute the plan.

There will always be a crisis somewhere and global news reporting has made it much more likely that you will hear about it and how it's alleged to impact us. Of course all it really does is feed the news cycle and gives many people to opportunity to debate it, particularly in social media. C'est la vie. Keep calm and carry on continues to serve me well.
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Re: Have the Western Democracies peaked?

Post by Shakespeare »

Well, well, well. :roll:
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