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Population, Platforms and Pioneers

In a 2015 quarterly essay we did some basic analysis on the potential drivers of economic growth. We found support for the notion that perhaps more than 85% of real economic growth was explained by an increasing population needing more currency in circulation with which to interact. We reviewed the correlation between population growth plus money supply growth vs. economic growth, and we were careful to not make an argument for causation. A late mentor to our firm, Bill Slaughter, once found the variable that had the highest correlation with stock market returns over some period of time was the volume of milk produced in Bangladesh, which proved the point that we do not want to be making investment decisions on such obviously spurious relationships. That being said, it makes sense to us that the economic activity of a country with a population of one million people will be smaller than when the population reaches ten million or one hundred million. The amount of money in circulation would need to increase for there to be enough for people to interact financially as the populations grew. Any increase in the money supply greater than the growth in goods and services provided would lead to inflation.

We would not be surprised if the existing U.S. population effectively levels off for an extended number of years, with the majority of any increase coming from the level of immigration. We think this is of the utmost importance from an investment perspective, and it is quite possible that for the next year or two, many of our quarterly essays will be subtopics on population growth and demographics of the U.S. and the rest of the world. Some of the essays may be shorter than what readers have become accustomed. A series of books could be written on relevant topics, so our goal with the essays will be more to highlight a topic that generates conversations with you rather than write an exhaustive book.

A theme that we will repeat throughout, is that we expect businesses that are “platforms” and/or “pioneers” will perform the best in both global and local economies with low, zero, or negative population growth. Platform companies are those in which people generally find their way on, naturally. This type of company primarily maintains and improves the platform, and if it does well enough it can become an almost integral part of the economy, and the everyday life of consumers or other businesses. Some platforms will be growing quickly while others may have matured. Platforms could be quite profitable and able to fund growth of earnings and/or dividends. Pioneers, however, create new products and services that often disrupt the status quo, and for every one pioneer that succeeds there are many more that try and fail.

Population growth is driven by the numbers of births, deaths, immigrations, and emigrations. So, let us jump right into a tough topic that we believe many people may be noticing. If you have found yourself noticing a higher than usual level of people dying, you are not alone, and the observation is validated by the numbers. From the chart below, you can see the total number of deaths (blue line) spiking up during the pandemic and leveling off.

Logically, the first suspected cause would be that this is due to large older generations simply getting older. However, from the 2021 census report, “The last two decades have seen the country grow continuously older. Since 2000, the national median age – the point at which one-half the population is older and one-half younger – has increased by 3.4 years, with the largest single-year gain of 0.3 years coming in 2021, bringing it to 38.8 years.” (1) And from the 2022 report, “No states experienced a decrease in median age. The nation’s median age increased by 0.2 years to 38.9 years between 2021 and 2022.” 1 So clearly, the increase in deaths is spread across the generations in a way that the population continues to get older. Of note, to our eye, the number of deaths in the UK seems to resemble that of the U.S. (2), and the number of deaths in Canada increased modestly during the pandemic and has continued to increase since the pandemic (3).

The chart that was such a surprise that it bears mention, even though not as obviously directly linked to economics (which is not to say that it is not directly linked to economics), was the chart for Sweden. The total death in Sweden barely registers the impact from the pandemic and average levels after the pandemic.

To summarize:

- Expect us to write about population levels for several quarters.

- Platforms and Pioneers are the types of businesses we will be emphasizing in portfolios.

- Please reach out to discuss these and other topics.

Redmond Asset Management, LLC July 2023

The opinions contained in the preceding commentary reflect those of Redmond Asset Management, LLC (RAM). The stated opinions are for general information only and are not meant to be predictions or an offer of individual or personalized investment advice. They also are not intended as an offer or solicitation with respect to the purchase or sale of any security. This information and these opinions are subject to change without notice. Any type of investing involves risk and there are no guarantees. Redmond Asset Management, LLC does not assume liability for any loss which may result from the reliance by any person upon any such information or opinions.

Redmond Asset Management, LLC is an independent, SEC registered investment management firm located in Richmond, VA and is not affiliated with any parent organization. RAM was founded in 2005 and registered with the SEC on December 22, 2005. The company offers investment management services for equity, balanced and fixed income portfolios to corporate, institutional, and individual investors.


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