The Coming Agequake

How demographic disruptions are rippling across global markets

Ric Edelman: It's Wednesday, August 9th. China's death rate is now higher than its birth rate. Chinese births have gone from 18 million a year in 2016 to below 10 million last year. That's a drop of 46%. That's a problem not just for China, but for the entire global economy. A shrinking population means lower spending by Chinese consumers, and that threatens global brands. It means less need for new real estate. That's 25% of their economy.

It also means more demand for health care and government services. Chinese households have lower incomes than US households, and so older residents there rely more on state pension payments and retirement. The Chinese Academy of Social Sciences says the country's main pension fund is going to run out of money by 2035 because of the shrinking workforce. In China, people retire by age 60, and that makes the entire situation even worse. The Chinese Research Center on Aging says 25% of people 60 and over are unmarried, single, separated or widowed. That means no social support system or network to help them.

In the US, the drop in births is 15%. We've got a similar issue as China. Our nation's median age is now 39 years. Half pf all the people in this country are over the age of 39, according to the Census Bureau. The oldest residency of state - Maine, the average person there is 45 years old. 43 in New Hampshire. The youngest people in the country, they live in Utah. The average age is 32. 35 in DC. 36 in Texas. No state has experienced a decrease in the median age.

However, we are all getting older everywhere. This is causing governments to borrow more and more money to pay for those social services that older people need and the interest rate that governments pay on their debt. It's based on their ability to repay that debt.

But now Moody's, S&P and Fitch are all warning that demographics are hurting government credit ratings around the world. As populations age, you have fewer workers, more old people. That means less tax revenue and higher expenses on pensions and health care. The share of the population over 65 is going to go from 20% to 30% over the next 25 years in Europe, Japan and the US. Fitch has already downgraded France's credit rating. Moody's is threatening to cut Germany and Spain, South Korea, Taiwan and China. Standard and Poor's says half of the world's largest economies will be junk rated by 2060.

But in South Korea, people are actually getting younger. That's because on January 1st, the government is shifting to a new way that they calculate age. For centuries, South Koreans counted age starting at birth, meaning when you're born, you are one. The rest of the world. You've got to wait until your first birthday to be one. The new law in South Korea is going to switch everybody to the way that everybody else does it all around the world. So officially in South Korea, everybody's getting a year younger, maybe depending on when you're born two years younger. 

That's how we can stop this aging problem. We should all shift to dog years. Hey, I'm only nine. All right. A little more serious now. We've been talking about the coming crisis in real estate, pretty much every sector of it commercial office buildings, retail, residential, government offices. Now, senior housing as well. The occupancy rate for senior housing facilities is only 84%, down from 2020 when it was 87%.

Why is the occupancy rate for senior housing falling? Well, we've got more older people now than before. They have more wealth than before. Why is the occupancy rate down? One reason being floated, people are working from home. You see, when you had to go to the office, you needed to have your mom live in a facility that could look after her. But now, if you're working from home, you've got more opportunity to look after mom yourself. And housing prices have fallen. Lots of seniors don't want to sell their homes at today's prices, especially since senior housing prices have gone up with inflation down. So more older people are staying put. That means lower occupancy rates for senior housing facilities.

So if you're running a retirement community, how do you get seniors to move in? You make the offer really tempting. Senior communities are really stepping up their game. They're improving their food, for one thing. Farm to table selections, restaurant style settings, white tablecloth restaurants, seasonal menus on site chefs. These are experiences that compare to a five star restaurant.

Sunrise Senior Living is one property in New York City on East 56th. The rent is $15,000 to $25,000 a month. You get meals at a second floor restaurant. The menus change daily, all the foods prepared on site. It's also a wine bar. They feature pastrami from Carnegie Deli, pastries from Balthazar.

And at the Hacienda in Austin, restaurants include the poolside Poppy's Catena, the upscale bistro, the Mark Seasons, a casual dining destination with a changing daily menu, and Alma, a Texas-themed restaurant. The menu was designed by an award winning chef features seared sea bass, bone in ribeye and rotisserie chicken. It's so good that the public can book reservations, not merely residents living there costs $3,600 to $7,500 a month and includes one restaurant meal a day. Chefs love working at retirement homes. Dinner's over by 7:30. They get to have a life, too.

So if you haven't looked at senior housing facility lately, you might want to look again. Changing demographics. Aging populations are causing shifts pretty much everywhere. Don't ignore this. See you tomorrow.

Hey, yesterday. Did you miss it? My special webinar on the Bitcoin ETF applications. If you missed the webinar, don't worry, you can still view it. The encore is available at my sister company, the Digital Assets Council of Financial Professionals, DACFP.com. The links in the show notes you can watch for free. I encourage you to do so. See you tomorrow. 

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