Can Census Foretell Future? Wall St.’s Willing to Bet on It
With the release this month of the 2000 census’ first trickle of data, sociologists, politicians and demographers began a predictably highbrow debate on the shape of American society.
But far removed from the Beltway and the ivory towers, a cadre of Wall Street analysts is eagerly mining the same information for nuggets that will help them lead their clients to riches--or, at least, sound investments.
To them, the nation’s booming Latino population makes Spanish-language media stocks a good buy. The falling divorce rate could boost shares of single-family-home building companies but cause the toy industry to tank, with fewer step-parents and step-grandparents around to lavish goodies on children.
In the fast-growing over-50 age group, they see a bonanza for “the products that unclog Dick Cheney’s arteries,” as one analyst put it.
Thousands of moneymaking theories will gain or lose ballast in the next 18 months as the Census Bureau gradually releases data updating who we are and how we live, from the percent of college graduates in Thousand Oaks to the number of people who live alone in Topeka, Kan.
“Many people in the investment game fixate on what’s hot today,” said Ken Dytchwald, an author and founder of San Francisco-based Age Wave, which develops businesses geared to the nation’s expanding elderly population. “Demography works at the speed of life, but if you understand its lava flow, you can anticipate the big changes.”
The approach is not foolproof, of course.
Take the mid-1980s, when experts predicted the 1990s would bring a boom in booze, reasoning that baby boomers would follow their parents’ pattern and exchange beer for hard liquor once they hit middle age. But boomers stuck with brew, drank less overall per capita and became obsessed with their health.
Still, most big investment houses now have analysts who specialize in predicting and profiting from population shifts, an area once considered too musty and academic to matter amid the stock market’s rat-a-tat.
Virtually all of the specialists expect the census to show unprecedented growth in the nation’s senior population. Whereas preceding generations became more tightfisted in later life, baby boomers are healthier and wealthier--and primed to fuel expansions in a range of health-care and disease-prevention fields as long as government intervention does not cap off their profitability.
“Anti-aging hormone therapy will explode like anti-acne medicine did in the 1960s,” Dytchwald predicted.
Lecture-circuit star Harry S. Dent Jr., the California money manager behind the Dent Demographic Trends Fund, gets even more specific. Spending, he said, peaks at age 47, and the census--mirroring other surveys--will show bumper crops of boomers hitting that milestone through 2008.
Since boomers will be past their late-30s borrowing prime, he foresees leaner times for lenders but robust returns for estate-planning firms and full-service brokerages. Another potential winner: Harley-Davidson. “The biggest spending on motorcycles is done by people aged 45 to 49,” Dent said. “As long as they continue to be a leader in this product category, they stand to benefit.” As both a simple head count and a barometer of social behavior, the 2000 census results may spell out the future of a broad range of industries, analysts said.
Merrill Lynch senior investment advisor Robert Farrell said he will look at what the census says about the nation’s teen population, looking for details about the so-called “echo boom” expected to swamp the nation’s college campuses for the next decade. “We’ll be spending a lot of money improving the level of education. There should also be a strong market for specialty apparel and, eventually, hand-held high-tech devices,” he said. “The biggest problem will be separating fad from true trend.”
Todd Buchholz, chief investment officer of the Washington, D.C., investment fund Victoria Capital, is eyeing numbers that show growing communities of Latinos in states as disparate as Iowa, Oklahoma and Mississippi. Spanish-language television and radio companies such as Univision will spread with them, he said.
Buchholz also plans to cross-reference census information with other data to delve into housing trends, particularly among new home buyers in their 20s. “I’m interested in the trend away from McMansions toward smaller homes with more space around them, and what that might mean for the construction industry,” he said. “The census allows you to have some foundation, but it only takes you 20% of where you need to go.”
Because technological advances have made demographic information newly accessible and easier than ever to manipulate, analysts’ toughest job may be outsmarting the herd, sniffing out which trends are still ripe for exploitation and which have already become oversubscribed.
“You can’t make any money on something everyone knows,” Buchholz said.
