Happy Friday! Here’s the pitch from Yiannis Mostrous that got me interested today:
“… the population of children aged zero to 14 has decreased steadily year after year…
“… yet sales of children’s products have exploded—from USD 11 billion in 2005 to USD 30 billion in 2009.
“This apparent disconnect is the direct result of the one-child policy.
“Conclusion: Children have become precious possessions, cherished above all else by Chinese families, especially in urban areas where they are the single focus of six adults—two parents and two sets of grandparents—who are willing to dote, and spend lavishly, on them.
“It is now commonplace for upwardly mobile middle-class families to spend half their income on the child—and the most recent figures indicate that Chinese household spending on children’s products has doubled over the past five years.”
Sounds good, right? This is a story we’ve seen told many times over the years, most often by China stock enthusiast Robert Hsu, and the basic pitch makes perfect sense and is backed up by lots of impressive numbers and demographics: The Chinese are getting older, and the one child policy has created a generation of spoiled brats. OK, not as spoiled as many Western kids, but for middle-class Chinese in particular the focus on family and the small numbers of children relative to adults means that huge spending and attention is lavished on this generation of kids — after all, their parents were the result of the one-child policy, too, so now it’s often six employed (maybe) adults who have but one child to spend on. That has meant big investments in private education stocks, with well-known names like New Oriental Education (EDU) being long-term beneficiaries of the willingness of the Chinese to invest heavily in their kids, who’ve been given the nickname “little emperors.” But this idea is a little different, and gets to more of the western idea of consumerism — buy ’em toys and cute clothes, not fancy educations!
Mostrous is trying to get us to buy his Global Investment Strategist, which often touts stocks that I find interesting — though I thought it sounded more fun when he called his letter Silk Road Investor. He’ll charge you $495 for a year’s subscription, which is more than I’d want to spend to satisfy my curiousity, so I thought we ought to try to pick out this stock for you ...