August 3rd, 2010 - no responses
We have written before on the important impact of demographics on real estate and economy on a whole.
When talking to real estate developers in Belgium, it surprises me each time that they fail to acknowledge that price appreciation of Belgian real estate from 1980 until the financial crisis occured parallel with the entry of boomers into the labour force. In countries like Belgium an massive amount of women entered the work market and all people obtained higher educational levels than their parents. The quantity and quality of labour increased, total consumption rose and so did aggregated savings. These savings took in countries like Belgium the form of real estate investments and prices rose.
Those times are over in Belgium.
The trend of an increasing amount of woman entering the labor market stopped (saturation reached), educational levels are no longer going up (top has been reached), productivity is decreasing in Belgium and so are the aggregated savings. This has nothing to do with the crisis, it is a long term Trend that started in 2004 and it’s fundaments are the demographics and the massive immigration of people with extremely low added-value to the Belgian economy.
Which brings is to what is called demographic dividend; the major drivers of real estate growth.
Demographic dividend happens when (1) falling fertility lowers child dependency and (2) when the working age population (15-64) expends but (3) before the old age dependency starts to rise significantly.
Belgian lost it’s demographic dividend completely; on the contrary, the country is going into an area of demographic deficit; not only because of the above 3 drivers, but also because of the destructive immigration policies of Belgium.
Demographic dividend goes hand in hand with rising investment and accelerating growth; the Western world enjoyed demographic dividend for the last 30 years; but now the party is over, the benefit is exhausted; no new workers are entering the job market and a massive amount of long-living baby-boomers are retiring, aggregated savings are falling. In the Western world the new morale is “walk away from your mortgage, buy an iPad”
People who believe that in Western Europe the real estate prices will recover after the financial crisis are wrong; they forget the impact of the above described much stronger negative driver. The number of 20-44 year olds, who are the ones buying real estate and first-time homes will fall by 20% in the next two decades, even up to 30% in Belgium and Spain and … China (yes, China: the 1-child policy will have a very ugly impact on China soon), and even decrease a massive 40% in South Korea.
Brazil has a very healthy fat belly of new entrants in the labour market for the coming 20 years, their time to enjoy the stimulans of demograhic dividend.
George Magnus wrote an insightful book on the theme in 2008, called “The Age of Aging“, next October his new book “Uprising: will the emerging markets Shape or Shake the world economy” will be published.
July 15th, 2010 - no responses
We reported last May on the attempts of Europe to revitalize the talks on a trade zone between Europe and the Mercosur. Not much has happened since, except for the fact that the trade balance of Europe continues to deteriorate. Last year in April their was just a tiny trade surplus of 0,1 billion in Belgium, this year (despit the Euro which decreased substantially in value and should support exports), the trade deficit amounts 1 billion Euro in April. That is massive.
Today some news on the attempt of the trade talks between Europe and Mercosur appeared again. Yet, agriculture remains a problem. Read: Europe wants to export, but prevent Brazilian imports coming in. That bird won’t fly. A lot of news on these trade talks in Europe, but not a word in the Brazilian press; Europe is far less a priority for Brazil than Mercosur is for Europe, what counts for Brazil is China and emerging markets like (South) Africa, that’s where the growth is.
Tags: europe mercorsu
July 14th, 2010 - no responses
June 8th, 2010 - no responses
Written on Saturday June 5th:
The Financial Times’ article of last week made it clear to which extent BP and the rest of the US offshore drillers will be under the thumb of the Obama administration.
My personal view is that this impact is today calculated into the shares of BP (trading at 37,16) and Transocean (trading at 50,20). An opportunity in the coming weeks for people with a stomach?
On the more safe side: with this BP event, there will be ever increasing importance placed on reserves which will not be affected by the Obama administration. While pressures from pending U.S. legislation on oil drilling may pressure international governments to apply similar restrictions on offshore drilling, Brazil will not be one of them. Petrobras will enjoy vigorous drilling offshore on their newly discovered Tupi field. This massive find contains by conservative estimates around 6 – 8 billion barrels of oil and gas.
Actually, last Friday Bloomberg reported Petrobras did yet another oil find at the Marlim fields, adding another 380 million barrels to their reserves.
Petrobras is trading at 36,06, 50% down from its May 2009 72,38 top.
Petrobras will be good for Brazil, no doubt. And the BP events will add to this. But will Petrobras be good to its shareholders? Brazil has made it evidently clear that they intend to use Brazil’s new Tupi oil field as a springboard for their domestic economy. The Tupi oil field will become the platform which Brazil will use to invest in Education, Social Services, Infrastructure, etc.
The bets are out, end July / early August, Petrobras will organize a share offering of between US$ 50 and 60 billion, amongst the world’s largest ever launched.
And there is also…
Total
Repsol
Suncor
To put on your radar.
In my opinion, oil futures will be back at USD 85 – 90 next winter; US slows down drastically all of a sudden.
And did we hear Obama shout “Natural Gas” and “Nuclear Energy” in the same sentence?
UNG +
GAS
CYMGF +
FCG
Let’s put the flag out on a 100 portfolio:
BP: 5 at 37,16
RIG: 8 at 50,20
PBR: 12 at 36,06
TOT: 17 at 45,25
REP: 11 at 19,05
SU: 6 at 32,56
UNG: 15 at 8,18
GAS: 3 at 39,57
CYMGF: 17 at 3,92
FCG: 6 at 16,63
In August 2011 we dig this up again.
Tags: oil brazil, petrobras
May 7th, 2010 - one response
With all the turbulences in the European markets, one would almost forget this positive news:
The European Commission decided this week to relaunch talks on creating a Freetrade zone between Mercosur (Brazil, Argentina, Paraguay and Uruguay) and Europe.
Previous negotiations were stopped in 2004. Also services would enter the negotiations.
German Handelsblatt covers the start of the negotiations:
“Der Wirtschaftsgemeinschaft Mercosur gehören Brasilien, Argentinien, Uruguay und Paraguay an. Ihr gemeinsames Bruttoinlandsprodukt beträgt rund 1 300 Mrd Euro. Der Wert europäischer Investitionen in die Mercosur-Staaten lag zuletzt bei rund 155 Mrd. Euro. Laut Kommission sind sie damit höher als die europäischen Investitionen in China, Indien und Russland zusammen. In Jahren vor der Krise sind die europäischen ausfuhren Richtung Mercosur jährlich um rund 15 Prozent gestiegen.”
European investments in Mercosur total 155 Mrd Euro, which is more than European investments in China, India and Russia together.
Read also the excellent article in Brasil Economico on the topic today.
Tags: freetrade mercosur europe
