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International Investments and Bubbles of Wealth II

investment trends

Gary Scott

Yesterday’s message looked at the demographic fact that America’s population is getting younger.  It was suggested that a new baby boom may be the answer to the baby boomer retirement, Social Security and Medicaid problem.  Armed with new technology, the new workers will bring productivity that can run future governments and pay off government debt.

This growth surge could push real estate prices even higher. Yesterday’s USA Today article "Population boom spawns super cities" says that America’s "population is booming, development is sprawling and the economy is globalizing." It points out America has 295 million people but “braces for another 125 million people by 2050."

Look at the numbers. 125 million over 45 years translates into nearly 3 million more people a year or about the amount of people in Atlanta and its ten county surrounding metropolitan area. In other words, we have to build an Atlanta (and surrounds) each year for the next 45 years. Perhaps the real estate book is at least partially justified.

Yet there is a gap. Boomers start retiring in 2012. The new wave of youth does not really take hold until 2030. This gives us some investing clues.

First, we may currently want to invest in other currencies.

European and Japanese fertility rates have fallen. By 2040 or even sooner, the U.S. population will overtake Europe's. In 1950 Europe had twice the population of the U.S. This does not bode economically well for Europe (or the aging Japan). 

However in the short term, before the falling fertility makes the dollar stronger, our extra youth won't come into play. The baby boomer wave came because America won WWII. Japan and Germany lost that war so they did not have the same trend. This means that America will have a sudden retiree problem ahead of Europe and Japan.

The dollar is currently enjoying a (in my opinion) short term upswing which creates good opportunity to switch into other currencies such as the euro, British pound, Swedish, Norwegian and Danish kroner, plus Australian and New Zealand and Icelandic dollar (yielding up to 9%).

Some of the eastern European currencies now offer potential and higher interest rates. For example Hungarian florin investment grade bonds now yield over 6%. For example anHUF 6,25% Hungary Government bond that matures 12.06.2007 is priced at 99.86 and yields 6.3%.

The Icelandic dollar also looks interesting. An ISK 0,00% Iceland t-notes  that matures 09.02.2007 is priced at 87.50 and yields 8.8%.

Jyske Bank is very bullish on the ZAR (South African rand) because the ZAR corrected from 5.71 in the beginning of March 2005 to 6.83 today, which is a correction of approximately 19%.

A AAA rated ZAR 7% KFW bond that matures 15.04. 2008 is priced at 100.05 and yields 7.21%.

South Africa reduced its interest rates in April, but there is political pressure for further cuts which is one reason for the correction in the ZAR.

For more information on such bonds contact Thomas Fischer at

There will be other great investing opportunities created by this new wave. We’ll look at more of them tomorrow.

Until then, good international investing to you.


P.S. Learn more about how to invest in currencies over the months ahead. Join currency expert Thomas Fischer, Merri and me as we look at how to invest and do business abroad. DETAILS

investment trends
International Investments that Sell
updated April 10, 2005
investment trends


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