Thoughts For The Future

Long term issues that will affect asset allocation decisions.

Demographics - The aging of America

      1) Fewer workers supporting more retirees

      2) Cost of healthcare

      3) Liquidation of debt as older Americans retire

      4) Change in housing needs

      5) Recreation for the elderly

      6) Multi-trillion dollar intergenerational transfer of wealth

Shift To Quality From Quantity

      1) Scarcity of resources & increased cost of necessities

      2) Aversion to debt in a non-inflationary environment

      3) Global economic efficiency allows little price flexibility

      4) Escalating battle between the "haves" and "have-nots".

      5) Potential for inter-generational battles.

      6) An increasing premium on people's time.

Currencies

      1) The strength of the dollar as an international currency

      2) The "dollarization" of Latin America

      3) The Eurodollar transitions from a virtual currency to hard money

      4) The role of China and Japan (Delinking the yuan from the dollar?)

Structural Economic Issues In America

      1) High private sector debt

      2) A huge and prolonged trade deficit

      3) An exceptionally strong dollar (Now fading?)

      4) A budget surplus which turned to a large deficit

      5) A retirement system that cannot continue to be funded on a current payment basis.

      6) Intense competition for capital

      6) The cost of terrorism (economic cost & change in lifestyle)

Globalization

      1) The capitalization of emerging markets is very low compared to their proportionate share of world GDP and world population.

      2) Population growth in the developing nations will dwarf that of developed nations in the future.

      3) The earth's resources are finite, but the human population is growing exponentially.

      4) Energy and most commodities have been remarkably cheap and available to Americans. How long can this continue? What will be the role of water?

      5) Global economic democracy is likely to intensify competition. While the world may gain from efficiencies, the gain may come amidst a huge Darwinian struggle.

      6) Globalization carries with it an unmeasured risk that results from centralization. Everything from the spread of disease to the control of infrastructure will operate in a new paradigm.

New Technology

      1) Genetics and new medicines

      2) A new wireless world

      3) The maturing of the Internet

      4) Integrating people with technology

      5) Managing information: the need for systems and education

      6) Changes in lifestyle and the workplace