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I'm in the midst of writing a post on oil elasticity and as such have been reviewing some interesting research on OPEC's website and happened upon the table below, which outlines projected population growth rates.   Over the course of the next few weeks, we will be officially introducing our third duration, which we will call TAIL.  This duration denotes investment themes of 3 years or more, and, as always, these themes will have a price attached to them.  In the OPEC 2008 World Oil Outlook, which as an aside is an incredibly detailed publication, I found the attached table which outlines population levels and growth for the major regions around the world.  Demographics are clearly in the TAIL, but will be moving into TREND and TRADE in the coming years.  The table is outlined below:

 The Demographic TAIL - dj1

There are a few key takeaways:

  • There are two groups of regions: those taking share in the world population race and those losing share. The regions taking share include: Middle East and Africa, South Asia, OPEC, and South East Asia. The regions losing share include: North America, Western Europe, OECD Pacific, China, Other Europe, and the former Soviet Union.
  • China is the nation losing the most share as it is projected to go from 20.2% of the world's population in 2006 to 17.7% of the world's population in 2030.
  • OECD Pacific, FSU (the former Soviet Union), and Other Europe are the three regions that projected to decline in population from 2006 to 2030; and
  • The three regions with the largest projected growth, Middle East and Africa, South Asia, and South East Asia, are currently 44% of the world's population and over the next ~20 years will contribute 73% of the world's population growth, or 1.2BN people.

Over the course of the coming year, we will be write more TAIL notes, and many of these will have a demographic underpinning.  The global population share shift has implications for consumer spending, energy use, geo-political risks, and product development, to name a few areas.  Both investors and management teams that do not have their focus on the TAIL as it relates to demographic trends are ignoring important fundamental shifts that will drive markets for decades to come.

Daryl G. Jones
Managing Director