What’s the world’s largest asset class?
It’s real estate. But what are homes worth when there is an empty house on your block with no one to fill it? What if there are 10 empty houses?
John Authers recently wrote about declining fertility trends and pricing them into markets. By now, most people have seen the charts showing the sharp drop in fertility rates since 1960:
There are no shortage of explanations from:
- The cost of living
- Breakdown in community
- Breakdown in religion
- Cost of housing
- Cost of daycare
- Feminism
- Delayed careers
- Climate change fears
- People are selfish
It’s obviously some mix of culture and economics but no seems to have landed on a real solution, so it’s safe to say this won’t be reversed any time soon.
What Authers points out is that the trend is worsening and current projections don’t really extrapolate so there’s a decent chance that we undershoot the baseline scenarios, which are bearish of just about every asset class on earth.
I tend to think that a huge blindspot in markets is this kind of thing, which is forseeable but will catalyze slowly and at an unforseeable time. The instinct is to maintain market multiples but this should contract them.
