15. RISK FACTOR 1: Baby Bust + Consumer Shift
source: HiddenLevers, WSJ, Huffington Post, Time Magazine
Largest Generation Aging + Birthrates Slowing
more whites
dying than
being born
sharing
economy
for all
Latino
birthrate
decreasing
youth buys
experiences
not stuff
16. RISK FACTOR 2: Robot Takeover
reduces
commodities
demand
Technology + Automation render humans jobless
source: HiddenLevers, Forbes, Business Insider, Zero Hedge
more jobs
eliminated
than created
professional
services now
under attack
less jobs
= less
consumption
tech only
gets cheaper
17. RISK FACTOR 3: Commodities Perfect Storm
bumper
crops last
two years
source: HiddenLevers, EIA, DOT, Business Insider,
less China
demand for
metals
Crude Oil + Food Prices + Metals Goin’ Down
oil production
approaching
1970 peak
oil demand
15%
below peak
secular
stagnation
19. Scenario Complete – Hello Rate Hike
Scenario Updates due to Fed (in)action
Scenario Updates
InflationGlobal Deflation
Fed
Delays
Super
Tantrum
Fed Pops
Bubble
20. Scenario: Global Deflation
Good
Flat CPI +
Growth
Neutral
US Treads
Water
Ugly
US Turning
Japanese
CPI
-3
S&P
-33%
CPI
0
S&P
-9%
CPI
0.2
S&P
15%
Global QE coupled with
modest growth might
enable bull market to
continue
Drop in inflation and global
growth fears lead to mild
bear market (including S&P
correction to date)
If deflation grips all first
world economies, drop in
demand leads to significant
equity correction, but bond
market rallies strongly
Good
Flat CPI +
Growth
Neutral
US Treads
Water
Ugly
US Turning
Japanese
21. Scenario: Inflation
If US economic growth
propels inflation, the Fed
can start its rate hike
schedule and begin
normalization
An unexpected burst of
inflation could force the
Fed to move faster than
expected, leading to equity
market declines.
A strong inflationary surge
could lead to a mild
recession, causing a deeper
market correction
Good
Fed
Target Hit
Neutral
Rapidly
Rising
Prices
Ugly
Stagflation
CPI
4.0
S&P
-20%
CPI
3.0
S&P
-10%
CPI
2.0
S&P
10%
22. The End of Inflation? – Take Aways
Inflation tanks are empty
across the first world – 0.0
Primary causes of deflation are
tech + demographic shift
Global QE has not beat back
deflationary forces
Technology has broken
normal commodities cycle