1. War Room 06 Dec 2012 Demographics – They are a changin’

2. War Room Monthly macro discussion Using tools in context Update on HiddenLevers Features Your feedback welcome

3. Demographics – They are a changin’ I.Demographics – Where are we now? II.Demographics – Where are we going? III.Scenarios IV.Product Update

4. HiddenLevers DEMOGRAPHICS – WHERE ARE WE NOW?

5. USA – Current age demographics Reading population graphs Show distribution of various age groups in a population Pyramid = expanding more young people + less old people House = stationary young people + seniors emerging Kite = contracting more old people + not reproducing Wide base pyramid = youth bulge social unrest + recessions More on population pyramids

6. INDIA expanding BRAZIL contracting CHINA contracting (birth policy) Comparison – Age demographics as Destiny Middle-East Youth Bulge Evident Egypt Jordan Gaza Yemen

7. USA – current diversity demographics Minority babies exceeded white babies in late 2011 Recent projections show whites falling below 50% of total population by 2050.

8. US Election Demographics: 1980 vs 2012 Sources: UConn Roper Center Archives, 2012 Exit Polling Brookings Institute: Minorities likely decided 2012 election 2012 - most racially polarized election in history

9. DEMOGRAPHICS – WHERE ARE WE GOING? HiddenLevers

10. US Age Demographics - Projected US population aging rapidly, but base of pyramid should remain in tact 20102050

11. USA Age Demographics - International Context bottom line 1. USA in better shape than Europe + Japan 2. USA in no worse shape than China US fertility rate at roughly replacement level of 2.1, compared to Japan at 1.36 US non-immigrant population is aging rapidly, as in Europe + Japan (US is one generation behind them) Majority of US population growth to 2050 expected to be via immigration (contrast to 0 immigration in Japan) Despite aging of America, US working age population in 2050 will be around 300 million, equaling today’s total population

12. Japan: Will USA follow same pattern? healthy age demographics… not so much

13. Japan: Demographic Disaster in Slow-Motion Japan population aging into dustbin Who you callin’ dependent?

14. Japan: Demographics + GDP bottom line YOUNGER POPULATION = SUSTAINABLE GDP GROWTH I knew it was da yoots.

15. USA – Diversity Projections Virtually all future US population growth among minorities White + Black steady. Hispanic grows most Population growth since 1980 from immigration: 58%58% Population growth until 2050 from immigration: 80%80% GDP growth depends on education of immigrants No, we are not turning Japanese Fruits

16. Immigration – Busted Myths Myth 1.Mexicans coming in droves 2.Immigrants taking US jobs 3. Immigration at all-time highs Reality Net Migration from Mexico now negative border arrests down 50% since 2008 Illegal immigrant population not growing 12.5% of population, 15% of workforce overrepresented due to aging domestics 14.9% of population was immigrants in 1890. Currently 12.5% Two thirds legal, one third illegal 10.8 illegals – 40% came in legally

17. DEMOGRAPHICS - SCENARIOS HiddenLevers Baby Bust Brain Drain Beneficiary

18. Downside Scenario: Aging Baby Boomers SF Federal Reserve Direct relationship between age demographics + P/E ratios Baby boomers aging, withdrawing from markets Downturn continues into 2020’s

19. Upside Scenario: Brain Drain Beneficiaries bottom line developed country realities mean immigration is a necessity for growth Smart immigration can avert Baby Bust Merit-based immigration reform Making it easy for world’s best + brightest to come to USA Educating children of immigrants already here Smart immigrants = GDP growth back above 3%

20. Guidance 1.Successful immigration form based on merit 2.GDP growth back above 3% due to immigration 3.Increased spending due to prime working-age immigrants 4.Only chance for GDP growth in developed countries Demographics – Baby Bust or Brain Drain Beneficiary? Guidance 1.Baby Boomers withdrawing assets to fund retirement 2.GDP stagnant to declining, similar to Japan 3.Retail Sales takes a hit as Boomers stop spending 5.SF Fed research projects nearly 50% drop in S&P

21. HiddenLevers – Product Update Interactive Lead Generation App Integrations: - Schwab Portfolio Center - Fortigent UI: Buttons + Sorting of Advanced Stats Coming soon: 1. PDF-friendly versions of all HiddenLevers pages 2. Annual feedback session - what do you want to see?