a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://4.bp.blogspot.com/_7ZckZ-8naz0/S5xDp7TGjVI/AAAAAAAADH8/Q6oC4jB4DZU/s1600-h/IR.gif"img style="float: left; margin: 0pt 10px 10px 0pt; cursor: pointer; width: 243px; height: 320px;" src="http://4.bp.blogspot.com/_7ZckZ-8naz0/S5xDp7TGjVI/AAAAAAAADH8/Q6oC4jB4DZU/s320/IR.gif" alt="" id="BLOGGER_PHOTO_ID_5448304036782968146" border="0" //aAs a followup to a href="http://randomroger.blogspot.com/2010/03/big-picture-for-week-of-march-14-2010.html"yesterday's post/a about the Super Cycle Oscillator pointing to several more years of bad real returns in the equity market Barron's a href="http://online.barrons.com/article/SB126844965073361487.html#articleTabs%3Darticle"published a short article/a drawing the same conclusion using what appears to be a completely different data set.br /br /The article was written by Thomas Kee Jr. from Stock Traders Daily. The indicator is called the Investment Rate and it measures demand for asset classes based on demographic trends. As a very simplistic example baby boomers pulling back from equities as they get older indicates a headwind for equities because that investment demand is going away.br /br /The big macro of this is easy to follow and I think the concept makes sense. I write about investment demand often but a little more micro than what Kee is focusing on.br /br /As you look at the back test of this it is obviously remarkable and in the time he has done this in real time, since the start of the last bull market, it creates a bit of an uh-oh just like the Super Cycle chart. The article does not spell out how he was able to compile data from 100 years ago and similar to yesterday's post it would be reasonable to question whether demand for equities in 1912 offers any insight into what demand for equities will be in 2012. I have to think that the equity market participation rate back then was a microscopic fraction of what it has been in the last, what, 20 years or maybe 30 years.br /br /I don't know of course it just seems like the obvious question. Question asked the idea of baby boomers thinking they need less equity exposure seems like it will obviously be a headwind. Jeremy Siegel has said many times that investment demand lost from baby boomers will be made up by a new class of emerging market investors who want to own the best companies in the world (paraphrase). I've heard Siegel make this argument several times and it makes no intuitive sense to me whatsoever.br /br /That the US has a demographic problem is not new and is not really disputed that I am aware of but the US is not alone in this. Japan might have a bigger problem than the US, China has a problem that some feel could start to manifest itself as soon as 2015 and big Western European countries that I think are such lousy investment destinations all have demographic problems of varying magnitudes and timelines.br /br /Countries with young average ages is a positive attribute for an investment destination and of course a trait we often see in emerging markets. In just about every article for theStreet that I write about an emerging market span style="font-style: italic;"something-or-other/span I mention the average age listed as one of the positives (in the instances where that is the case of course).br /br /A reader commented on yesterday's post asking what I was going to do if equity returns will be this bad for a while longer. Well I've been doing it (and writing about it for years). One theme of this blog from the start (with no claim of originality) has been that the US is slowly, or quickly depending on your view, becoming a less attractive investment destination. I've slowly been increasing client exposure to foreign equities as a big long term macro.br /br /The popularity of home bias as a blogging topic ebbs and flows but just as success in the last decade hindered on owning the right countries (along with a couple of big sector calls) so too will that be the case in the new decade. It is very unlikely that the right countries are the ones that dominate the EAFE Index. If you've been following this thread with me for a while I think all of these things have been quite obvious as long lasting headwinds for the US. This not to say that I was right about the magnitude of any of this because I wasn't but the span style="font-style: italic;"US as less attractive/span has been obvious.div class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/8532070-4843283712794555592?l=randomroger.blogspot.com' alt='' //div