A financial expert presented, in an address to Ontario Mining Association directors, changing social and economic forces that are altering markets for their products and services in the future world. Gareth Watson, VP of investment management and research at Richardson GMP, titled his address "Cautious Optimism in a Changing World."
"We are in the midst of a multi-decade transfer of power from the West to the East," he said. "Population changes have an impact on global markets and the East is becoming larger and younger while the West is becoming smaller and older. Global demographics support growth and higher demand for the mining and energy sectors and higher demand for products and services."
In North America and Europe, Baby Boomers, many who are retiring, want low risk and they desire to take money out of the system in the form of pensions and services, not put money back in as greater investments. The number of workers per retiree continues to decline in the West. "Countries with large youth populations have great potential if they are competitive, if they promote education, if they respect the rule of law, if they work hard and invest and if they consume," said Watson.
"The China story is not over but it may not be as good as it once was," he added. "China is a victim of its own success – with growth, comes growing pains. Things don't stay the same and excesses never stay constant. That country is now diversifying growth and keeping exports on hand for internal consumption."
Watson sees India as being in the early stages of becoming an economic powerhouse. Further down the road, he believes Africa has huge potential for growth 40 to 50 years into the future.
He expressed concern about youth today in the West who are making spending, housing and investment decisions based on zero interest rates, which is not normal. Watson believes the West can recapture some its former economic glory but at the moment it is short on cash and political leadership.
European debt issues will be solved eventually believes Watson and the United States is recovering, but slowly. "Too often politicians make decisions for political reasons, not economic reasons."
On a cautionary note, he added that "Canadians have somewhat of a false sense of financial security and have to realize they are part of a larger global system." In Canada, the flow of economic clout is moving from East to West, in the opposite direction than the broader world in general (or perhaps depending on your perspective it is moving in the same direction towards China).
Although this enlightening presentation by Watson came with the usual legal disclaimers of investment houses, the OMA audience of about 50 mining executives was appreciative of him sharing his well researched views and his final thoughts.
"There are so many things influencing markets right now that it is difficult to digest them all," he said. "The world is changing, but this time it is not a different version of the status quo. There are solutions to our problems but those who do not pay attention to demographic shifts here and abroad will be left behind."
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