Population Pyramids & AUDJPY
There is no doubt about it that in a modern society the amount of consumers, savers and investors, i.e.: people, are the most important component of the global business cycle. One tool for capturing this data is the population pyramid.
There is a very predictable pattern to demographics in modern times. People grow into consumers — think 15 to 25– then consumer/ savers — 25 to 35 — and then investors – 40 and up — before eventually retiring. If you don’t have an equal or greater sized pool of people moving up the age scale to replace investors and then retirees, who tend to downsize as they get older and move from riskier investments to less risky investments, then you have an economy where you will likely see coming pressure on real estate and stocks, as there are fewer people replacing the investment class then there are retirees. And we haven’t even mentioned the importance of the consumer pool, which tend to put up their biggest numbers from the ages of 20 to 35.
In comparing the population pyramid of Australia and Japan below, the Aussie economy certainly looks to have long-term advantages. While the price pattern on the monthly chart of AUDJPY tells a different story. Despite a bulging consumer and investing class in Australia, with plenty of more young people where they came from, the Japanese currency has maintained the upper hand against the Aussie since the panic of ’08. Regardless of what the demographics have been telling us for some time now the yen remains so much a strong currency that many hedge fund traders over the last 5 years refer to shorting the yen as “the widow maker”. And the yen reaffirmed that status in May when it rallied sharply against most currencies following a “mini” crash in U.S. stock Indices.
Despite the fact that being early is no less dangerous than being late in the trading and investing business, I have to think that at some point, perhaps in the not too distant future, the Aussie, with youth on her side regains the upper hand on the yen.
Jay Norris is the author of Mastering the Currency Market, McGraw-Hill, 2009 which is the text book for the intermediate level trading course offered though Trading-U.com see: Trading Courses Jay’s second book Mastering Trade Selection and Management, McGraw-Hill will be in book stores in 2011
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