Emerginvest

Japan: Decline of a Safe Haven

Japan20000:

In response to your questions:

"where on earth did your hear of the japanese stock market to be a safe heaven?"

One of a few sources:

NYTimes article: www.nytimes.com/2009/0...

"'At one time, it looked like Japan escaped the brunt of the financial crisis. Now we see Japan’s most damaged because it’s so dependent on trade, which is stalling,' said Hideo Kumano, chief economist for the Dai-Ichi Life Research Institute. "

"Tatsuo Ichikawa, a Tokyo-based strategist at the Royal Bank of Scotland [said]: 'Japan, a source of stability and liquidity at the onset of the crisis, is falling very fast. '"

Your second question:

"And how did it crash less if it is 60% from its peak in July 2007? It is still 80% down from its peak of about 40k in 1989."

I stated: "Its stock market “only” fell approximately 30% during the September crash"

Please focus on the key-phrase "during the September crash" - as in not from its high peak in July, but during the volatile month of September. According to Emerginvest, the TSE was at approximately 122,055 Yen at the beginning of September, and ended up at approximately 84086 Yen at the end. That represents a fall of 31.1% - or, like I said... approximately 30%.

Your Third Statement:

"What have you been smoking?"

I think it is much more highly professional, and a better reflection of yourself to ask for clarification in a non-attacking/insultin... manner. If you still disagree with the answer, then so be it, but it is typically polite to ask before unabashedly personally attacking the person you are trying to communicate with.


On Feb 18 06:37 AM japan20000 wrote:

> where on earth did your hear of the japanese stock market to be a
> safe heaven? And how did it crash less if it is 60% from its peak
> in July 2007? It is still 80% down from its peak of about 40k in
> 1989. What have you been smoking? It is understandably a more volatile
> exchange because it is hugely leveraged to the outside. Tokyo has
> traditionally traded with higher multiples.
> The currency market is a totally different thing because of a number
> of issues that other markets do not have. There you could attach
> the safe heaven label to the yen... in certain periods.
> Why even bother writing stuff that doesn't tell anything at best
> or simply misleads.

China and Brazil Offer Positive Emerging Market Returns

Teak,

Thanks for posting. I completely agree that most of the value for EM is in the long-term. When you look at certain completely downtrodden market/sectors like India's banking sector down 70% - its hard to not see the value in the long term.

I'm sure you read my above reply, and do agree that there is a significant amount of volatility left. However, with my Sri Lanka example - after I wrote my article there were still a few weeks of significant growth before it cooled off. I'm not advocating "day-trading" in such relatively unknown markets at Sri Lanka, but my point is that there seems to be a trend of growth spurts of a few weeks to a month where markets tend to be exceptionally hot. In addition, I wanted to point out to most investors who are feeling that there is no where to turn, that there are plenty of good, solid EM countries which are producing significant returns right now. I think most people don't hear about, or discount places like India/China/Brazil because they seem unsafe, but yet they're producing far higher returns than the rest of the developed markets will for the next year at least.

In any regard, I agree - EM is a great place to be in a long position. Thanks for the post and I'm always interested in hearing more thoughts!

Best,
Jonathan

On Feb 11 05:29 PM Teak wrote:

> A long-term investor will be in all of these markets to the extent
> that they can handle the down-side movements psychologically. My
> issue with articles like these is that it comes across like advice
> for the day-trader.
>
> Why not be long in Brazil, and China, and Taiwan, and India?? Eventually,
> all of these will move higher. And if they move sideways, then they
> will kick out dividends. But, of course, you have to own something
> that pays through the dividends.

China and Brazil Offer Positive Emerging Market Returns

Larry,

I completely agree. There is still a tremendous amount of volatility, and such large upswings (10%+ in a week) inherently carry the high probability of equally strong downswings. For example, I wrote a piece a while back using Emerginvest's data on Sri Lanka (www.emerginvest.com/EI...), and how it was one of the best performing stock markets in the world for about a month - skyrocketing nearly 20% in 30 days. I warned in the article that it could easily overheat - which it did... cooling off and shedding some of its gains: (www.emerginvest.com/Wo...).

The point is, you are completely right. There is still a significant amount of turmoil.

Thanks for commenting!

Best,
Jonathan
Emerginvest


On Feb 11 11:01 AM Larry House wrote:

> The only thing I would add is Morgan Stanley is very cautious on
> Brazil in particular and EM companies in general stating that the
> worst is yet to come for them. Just today MS has a lengthy piece
> on Taiwan and the worsening problems there because of the degree
> of slow down in China. I think there is great potential in EM and
> great risk as well.

Ultimate Economic Showdown: China vs. the U.S.

Nick,

Thanks for the comment. I don't think that mass hysteria or anything close will set in, all I'm saying is that there will be far reaching negative sentiment against the US which many people don't seem to be talking about. You might find an article I just read which is tangentially related fairly interesting.: www.nytimes.com/2008/1....

Are there any specific ways you think it will affect the rest of the world?

Ultimate Economic Showdown: China vs. the U.S.

economy101,

I obviously agree that investor confidence is one of the core issues of the crisis. Can you clarify "now they are backed by faith and confidence of China, Japan, Russia, and Europe on USA?" I'm not sure I know what you mean.

Ultimate Economic Showdown: China vs. the U.S.

economy101,

I certainly agree that investor confidence plays a major role, although I'm not sure what you mean by "now they are backed by faith and confidence of China, Japan, Russia, and Europe" if you wouldn't mind clarifying.

An Outcry from Emerging and Developed Markets Alike

Black and Smarty,

I don't disagree that they were taking in disproportionate amounts of foreign credit to sustain their growth - and I fully agree Smarty, "Bubble-nomics isn't self sustaining in the long run."

That being said, they were doing relatively well with the capital they had borrowed. China and India were the darlings of the economic world as they expanded. I agree that they perhaps did so a bit too fast.

I guess my point with this article was that both emerging and developed are calling for change for two very different reasons. I dont know if anything can be done about investors pulling money out of emerging markets, but I do think the developed markets will have a unified response. I guess we'll see.