Darrel Whitten

Bureaucrats, Parochialism, and the Japan Discount

Actually, I think the best thing that could happen is for the LDP to lose big in the upcoming elections, meaning they would lose control of the Upper and Lower Houses. The Lower House is more important because that is where budget control originates. If the LDP loses this, Japan will have its first truly two-party system--which we believe would work to make both parties mroe respondent to the voting public and help to elimnate over 40 years of pork barrel politics in the LDP.

Pricing Japanese Banks for Bankruptcy is Overdoing It

Dear William;

I don't know what your source of data is, but the source of the data for my comments was the Kabushiki Shimbun website
(www.kabushiki.co.jp/ma...), which carries daily TSE 1 sector quotes as well as forward PER and historical PBR and Dvd Yield for 33 sectors. They calculate PBR using the latest full fiscal year consolidated shareholders' equity per share, and the bank sector Arithmatic Stock Price Average.

The Tokyo Stock Exchange also publishes monthly PER and PBR data based on the TSE 1 Arithmatic Stock Price Indices. At the end of December, the book value per share for the TSE 1 Bank sector as calculated by the exchange (on a consolidated basis) was JPY650.80 per share, while the Arithmatic Stock Price Index for the Banks was JPY539.04, resulting in a PBR of 0.83 at the end of December 2007.

The Arithmatic Stock Price Index for the Banks recently fell to the JPY240 level, which works out to a PBR of 0.37X, implying that the Kabushiki Shimbun data is not in error.

Thus I fail to see how my comments could be construed as "sloppy" based on this data. Rather than going into a long explanation about whether the arithmatic stock price averages are better or worse than Topix indices or the Nikkei 225 indices, I believe my point is still valid, i.e., Japanese bank stocks are in aggregate at extremely oversold levels.

Japanese Value Stocks: Excess Liquidity and Extreme Volatility

Dear Lance;

Yes, after the stock tanked from JPY2,870 to JPY2,310 (19.5%), and the ADR is down some 4% since (from your March 9 call), so your Nomura trade is now up only 6%. From where do you want to start measuring whether yours is longer than mine?