The following piece seems to offer some interesting perspectives into terrorism trends. It was a portion of a longer piece titled:
No Short and Shallow for Asian Slide
Barron's, February 28th, 2009
LOOKING OUT EVEN LONGER, the case for global equities seems strong, in part because terrorism is peaking, avows Ajay Kapur, the global strategist at Mirae Asset Global Research, the Seoul-based fund manager. Kapur, formerly a Citigroup strategist, doesn't credit any policies to combat terrorism, just demographics.
Says Kapur, "My thesis is real simple. Axiom One: Young men generate almost all violence/conflict. Assumption One: The relative supply of young men is about to decline in most problem areas. Ergo: The supply of global violence/conflict has peaked out, with some exceptions, despite current anchored thinking."
Kapur sees a sharp drop in what he calls "projected youth-bulge ratios" -- the universe of young men aged 15 to 29 divided by men aged 30 to 50 -- for some of "the most conflict-prone countries in the world." In 2000, 96 countries had a youth bulge exceeding 100%. He sees that falling to 84 countries in 2010, 75 in 2015, and to 65 in 2020. Most of what remains will be in Sub-Saharan Africa, where mortality rates have been distorted by the AIDS crisis. Kapur draws heavily from the work of Henrik Urdal of the International Peace Research Institute, published by the World Bank in 2004.
In Pakistan, he says, the youth bulge will remain high into 2015, "then drop sharply into 2020. The Indian youth bulge is highish now, but drops sharply into 2020. Afghanistan will remain problematic all they way into 2020 and actually deteriorates! I foresee Afghanistan and Pakistan to remain the epicenter of violence for some time to come." He sees "sharply reduced" youth bulges in the Middle East, including Israel.
"The relative abundance of angry young men in faraway, potentially dangerous lands is about to fade away," Kapur writes (http://www.miraeasset.com/ourMarkets/outlookList.do). "Their numbers will shrink relative to phlegmatic middle-aged and older men, this outcome predetermined by reproductive decisions already made years ago...the potential enemy combatants will simply fall victim to middle age over the next decade...There will still be random acts of terrorism, but the frequency should decline."
Is it actionable as an investment thesis, as Kapur believes? There are doubters, of course. But Kiril Sokoloff, president of 13D Research, which studies global markets, calls the thesis "brilliant."
Kapur says "good things" lie ahead for global equities in the next five to 10 years, as risk [premiums] fall in response to greater peace. The greatest beneficiary won't be Asia -- in India, the decline in the youth bulge will be "good but not great" -- but in the Middle East and North Africa, where the changes are most dramatic. He likes Powershares MENA Frontier Countries exchange-traded fund (ticker: PMNA). He also claims that more competitive military spending by emerging countries makes the iShares Dow Jones U.S. Aerospace & Defense ETF appealing (ITA). Under such circumstances, emerging-markets investment banks, fund managers and brokers, tourism and leisure stocks also look attractive. In more ways than one, that's quite a reversal.
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