Ireland’s Demographics Point to Bright Future

by Charles Sizemore | September 3, 2013 11:06 am

The Irish are fleeing Ireland at the fastest rate since the Potato Famine.

Think I’m exaggerating? Recent data shows one person leaving the Emerald Isle every six minutes[1].

Since the onset of the financial crisis, nearly 400,000 people have left Ireland. That might not sound like much at first, but the population of the entire republic is only about 4.5 million. That means one out of eleven Irish citizens have left the country in just the past five years.

Some wandering Irish have since found their way back home, but the flow remains unmistakably outward.

This may sound counterintuitive, but I consider the Irish willingness to wander a source of strength, and it is a reason why I expect Ireland will eventually emerge from Europe’s sovereign debt wreckage in better shape than some of the other hard-hit countries such as Italy or Spain. Let’s consider a few demographic points.

To start, even after years of crisis, the Irish have maintained a much higher birthrate than their Catholic brethren in the Mediterranean. Ireland has the highest birthrates in the European Union[2]. Interestingly, nearly a quarter of new babies’ mothers were born outside the country — which gives you an idea of how cosmopolitan Ireland became during the high-immigration boom years.

Putting numbers to it, Ireland’s total fertility rate for 2011 (the last year for which there is final data) was 2.1 babies per woman. In both Spain and Italy, the number was 1.4 babies per woman.

Aside from being interesting factoids for cocktail conversation, why does this matter?

It matters because the babies born today are the workers and, more importantly, the consumers of tomorrow. A country without a healthy birthrate is a country without a future. The modern consumer economy depends on a steadily increasing supply of consumers to function; it’s hard to run a business when your pool of potential customers gets smaller every year.

Look at urban wastelands like Detroit — which has seen outward migration for decades — and you’ll see what I mean.

But didn’t I just say that Ireland is hemorrhaging people? Yes, but those stats don’t tell the entire story. Nearly 400,000 Irish have left the country, but about 277,000 of them[3] have returned or have been replaced by new immigrants.

And as Ireland’s unemployment rate continues to tick downward, I expect many of the young Irish who left to work in the UK, Canada or Australia to make their way back home, and bring with them the skills and experiences they picked up while abroad. It won’t happen tomorrow, but ten years from now, the Irish workforce could be the envy of Europe.

So … what does any of this have to do with money and investing?

To start, Irish stocks have quietly been enjoying a bull market as the country works its way out of its long recession. The iShares MSCI Ireland Capped ETF (EIRL[4]) is up about 50% in the past year.

I’m not suggesting you go run out and buy Irish stocks today. The overall Irish market is far too heavily concentrated in basic materials for my liking.

But I would definitely recommend keeping an eye on Ireland as a hotbed for innovation in the years ahead. This is the country that revolutionized European air travel with Ryanair (RYAAY[5]), the European equivalent of America’s cut-rate Southwest Airlines (LUV[6]).

Ireland’s constant inward and outward migration gives it an intellectual and commercial vitality you would normally expect to see somewhere like Silicon Valley.

Think about that over your next Guinness.

Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management.  As of this writing, he did not hold a position in any of the aforementioned securities. Click here[7] to receive his FREE 8-part investing series that will not only show you which sectors will soar but also which stocks will deliver the highest returns. The series starts November 5 and includes a FREE copy of his 2014 Macro Trend Profit Report.

 

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