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- Google's Potential African WiMAX Play [view article]
- Persian Gulf to Drive the Next Big Agricultural Boom [view article]
- The Emerging Markets Cell Phone Index [view article]
- Investing in the Middle East: A New Frontier Heats Up [view article]
- Investing in Africa: The World's Last Great Opportunity [view article]
- ETFs: Implications of Goldman Sachs Predictions [view article]
- No. 1 U.S. Export Is: Wealth [view article]
- Two Ways To Profit from Frontier Markets [view article]
- Middle Eastern Equities and Oil [view article]
- How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
- Investing in Emerging, Frontier and Obscure Markets [view article]
- Defining ETF Risk: Does It Pass the "Smell" Test? [view article]
loading ...Recent GAF Articles
- Somewhere the Sun Is Shining on the Markets
- Google's Potential African WiMAX Play
- 6 Emerging Markets ETFs to Watch
- Persian Gulf to Drive the Next Big Agricultural Boom
- The Emerging Markets Cell Phone Index
- No. 1 U.S. Export Is: Wealth
- Investing in the Middle East: A New Frontier Heats Up
- ETFs: Implications of Goldman Sachs Predictions
- Middle Eastern Equities and Oil
- Israeli Companies and CPI-Linked Debt
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How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
Hee Hee! You almost had me. I was almost a believer, and then I read the article. If I understand this correctly, your solution for Japanese investors in 1989 was to buy gold, foreign assets, and hold them until the year 2003? While they would have lost less money this way, they would have watched gold prices fall below $440 an oz and stay below $440 an oz until 2003. Considering that gold is not money, has no properties of money, and is classified as a commodity, it would have been much wiser for Japanese investors to place their money in the bank and earn a 1% dividend each year. At least they were beating deflation that way (sounds like a rigged match up to me).OK, so Japanese investors decided not to buy gold, but to invest their money overseas in other developing markets instead of their own (come to think of it, that is how the carry trade started). If we go back and look at the IMF reports showing growth in money supply in many developing markets, it is often far quicker than developed markets. Inflation is also higher in such markets. Cherry picking winners with perfect hindsight is far easier than predicting winners over the next 15 years. However the carry trade idea is viable under such conditions.
By far, my favorite quote comes from the comments section, lep July 19th.
"Investing in European equities (e.g. growth stocks) will be profitable, as well as in Brazil and/or Japan. It is possible that telecom companies (cellular providers) in Japan (DCM, NTT) and EU (DT, TEF, ERIC, NOK, VOD) will do well <<<due to explosive population growth>>>, popularity of cell phone usage, and little dependence on oil."
Demographic reports over the past decade or two have been discussing how Japan and developed Europe have birth rates below sustainability indicating population decline over the next several decades.
Fear-monger reports like these are fun to dissect. The authors clearly have not done their homework and have cherry-picked their supporting arguments. It is best to investigate the 'science' behind any such bold claims. Are there any other fixes to higher prices besides higher prices? Substitution effects are real and substantial over time. Reply
How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
I don't follow.. in the article referenced, it says: 'Japan did nothing. It refused to acknowledge the breadth and depth of its problems' But when talking about the US, it says: 'This time around in the United States, the Fed opted for the "prop it up" pathway instead of the decisive route' I'm not following this at all.. so by propping up Bear Stearns et al, the Fed isn't acting decisively?? Clearly, the Fed is acting decisively, by keeping interest rates low. You may not agree with their methods, but they are acting decisively, unlike Japan, which didn't act decisively. In fact, Japan did nothing. Your article makes no sense. You're suggesting that the US gov. should do nothing, and let the big banks fail, which would, in fact, create a 'lost decade.'Reply
How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
I see so many dire predictions lately that it leads me to believe many people actually want these horrible things to happen.....then again FEAR is a great selling tool....especially in the online editorial market!Be careful what you wish for....it may come true. Reply
How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
One thing about Japan-- it is not like the USA because they don't have a consumer culture (though, strangely, their percent of the economy that is services is still pretty high). What this means is this: as interest rates drop in Japan, people save more, not less, the opposite of the USA. That's why interest rates can go to zero and people still give their money to banks in Japan, and don't invest in stocks nor consume their savings. A big problem that has been remarked about in the past by academics. So I don't think Japan = USA. ReplyHow the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
JOSEPH FOSTER - Caps lock off, spell check on, please. ReplyHow the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
When I see people like Warren Buffet in the headlines buying companies in times like these that is telling me something.Sometimes one has to get the stock price out of ones head and look at the intrinsic value, earning power, and who is running the company. One also has to get the political, CNBC noise out too.
When you look at a stock chart 3 years from now and say gee, I wished I bought it down there, guess what, people like Warren did.
If you pull up a chart on the S&P from 1930 on I think one would see that that S&P outperformed gold.
I bet Warren looks at that long term chart too and says the risk reward isnt too bad in times like these to make investments in companies he is interested in. Maybe thats why he has outperformed so many investors.
Reply
How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
investor2: "Last time I checked the US was still the leader in Tech."Keep a careful eye on that. We have outsourced our manufacturing, at increasingly higher levels (e.g., design). Along with that goes a lot of technology. Add our educational crisis (more than half of US engineering/computer science graduate students are foreign nationals) and the blithe assumption that we will always be the tech leader is very risky.
secmaven: "There is only one way the massive debt of the US government can be liquidated....inflate it away by creating a worthless dollar."
Sad but true. If we were ever going to really pay off this debt, we would never have let it get so large. We are like the person who knows bankruptcy looms and figures why not party until the hammer comes down.
Norevand: Such fatuous nonsense is amazing. Do you really think the $1 trillion we spend annually on "defense" is a good investment? A lot of the world thinks the US makes the world "a more dangerous and unstable place."
"The world can't afford to allow the U.S. to fail." We'll see about that. Maybe the world is getting tired of propping up the U.S.
Reply
FOSTER
How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
I DO NOT AGREE WITH THE COMPARSION OF JAPAN AND USA RECESSION.THE US HAS VAST RESOURCES OF COMMODITIES, OIL, GAS, FOOD,
ETC ETC. FOREIGNERS HOLDING LARGE SUMS OF DOLLARS ARE ABLE TO EXCHANGE THESE DOLLARS FOR A VAST ARRAY OF GOODS AND SERVICES THAT IS PLENTFULLY AVILABLE IN THE US.
AS TO DEFACING OF THE DOLLAR, ALL COUNTRIES OF THE WORLD DO THE SAME, UK, EUROPE, RUSSIA, ETC ETC.
AN EXAMPLE I BOUGHT A HOME IN CALIFORNIA IN 1974 FOR $125,000 TO DAY PRICE $2,000,000 WITH CURRENT CORRECTION IN PROPERTY VALUES LET SAY IT IS NOW 1.7 MILLION.
I DO NOT OWN THE HOME NOW AND HAVE LONG AGO SOLD THE HOME.
I AM NOT AN ECONOMIST, THE INCREASE IN THE PRICE SETTING ASIDE THE SUPPLY AND DEMAND CONCEPT IS DUE TO THE DOLLAR LOOSING ITS PURCHASING POWER.
THE SAME HOLDS TRUE WEITHER THE HOME IS IN THE UK, FRANCE, GERMANEY OR ANY OF THE DEVELOPED COUNTRIES.
THE SMART INVESTOR CANNOT CHANGE WHAT THE POLOTICIAN MAY DO OR NOT DO AT BEST HE MUST ADAPT HIS INVESTMENT
TO THE DIRECTION OF THE TREND, TO DAY IT IS OIL AND GAS.
REAL ESTATE WILL ALSO REMAIN THE BEST INVETMENT FOR THE LONG TERM.
WHEN THE DUST AND STORM BLOWS AWAY MANY SMART INVETORS THAT ARE BUYING AMEICAN COMPANIES ON SALE WILL
MAKE A FORTUNE.
JOSEPH FOSTER A GLOBAL TRAVELLER AND INVESTOR.
Reply
How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
This is wholly true. However, there is really no safe haven for hedging and being *totally* removed from the ever-reaching tentacles of the dollar. Worst case is that having a cache of gold at home would be confiscated (remember, I said "worst case"). In the 1930's, the US monopolized the gold price and set it at something like $23/Oz. Certainly, if you think you are fully hedged in gold and the price will sky rocket, and 2-3 years from now you can cash in and will be on "easy street," you are probably making bad assumptions. If things get really bad, there will be frag everywhere, and you will need to be able to side-step a lot of landmines. Developing a good strategy for gaining financial and economic intel (self-study) will go a long way, and in spite of the above being in gold now at the 20-30% level is a very good idea.Investing in European equities (e.g. growth stocks) will be profitable, as well as in Brazil and/or Japan. It is possible that telecom companies (cellular providers) in Japan (DCM, NTT) and EU (DT, TEF, ERIC, NOK, VOD) will do well due to explosive population growth, popularity of cell phone usage, and little dependence on oil. (For example, it is not expected that Verizon has huge transportation costs requiring gas/oil expenses, of for buying construction/building materials -- all of which are hinged to commodities whose prices are up 50-78% in the last year).
Regarding a free economy (free commerce), it would be logical that the markets operate perfectly like a well-greased machine. In addition, you would expect that each new day, on average, brings growth to a variety of sectors. But we now find ourselves amidst a system where there is lost trust where there are players who care and those who just don't care. The Fed is almost at the point of saying "uncle," so you need to do you own due diligence on what to play next.
For gold, you can always purchase bullion on line with a credit card from the Perth Mint, in Australia -- if you don't have a way to purchase via your brokerage account or transfer funds electronically . Perth is owned and backed up 100% by the Australian government, and gold owned there can't be confiscated. (I actually have never purchased at Perth -- but it is a hip-pocket move that I know of if I see things going poorly). There are risks with owning bullion through etf's or at home, so be aware of the Perth route. Don't store gold in a bank safety deposit box, since the banks took ownership of boxes when gold was confiscated by Presidential Act in 1933 (www.the-privateer.com/...). You can own gold in the form of historical coins (Eagles, Canadian Maple Leafs, Austrian Philharminics) and these *likely* would survive , but watch out for Krueggerands, since I believe they're not protected. Last, there is no law that states you can own gold bullion in the US, since owning gold is a privilege, not a right. You can gain some extra insurance by owning pre-1964 silver coins ("poor-mans gold") if you need to barter for something using US currency. At this point, paper dollars wouldn't be worth much. All of the above regarding gold and the extreme doom & gloom is anyone's guess on what might happen in the future. As you retire, and bring your off-shore profits back into the US, you will be supporting your local economy -- so *anything* you do for asset protection will be meritorious service. Reply
Lieberman
How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
The biggest problem I see is that the man in the street who has their money in the market or carelessly leaves it sitting in the bank, or lives paycheck to paycheck for the most part, are the true drivers of the economy in the long run.All the manipulation of markets, printing of new dollars, charts and forecasts will fail when that regular guy gets nervous. When he has spent his credit limit and can no longer afford to fill up his Toyota, or pay his sub prime mortgage or pay for food for his 2.4 kids - this gig is up.
That time is here. Look out the window, take a drive to the suburbs.. Not the ones we live in... the one a few miles away. That is the pulse of this country and we are about to have a heart attack.
The average Joe isn't going to make it. They won't be buying oil, or food or clothes unless it is with some new fangled food stamps. The slightly more than average Joe who may have some retirement money left in the market or in the bank will bail and buy the only thing he knows. Gold.
Most of the world just doesn't read this stuff....that's what you have to remember when making your own play.... Reply
How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
An amateurish article. At best.Comparing a technological juggernaut like the U.S. to a technology follower like Japan is farcical. The U.S. military complex is also the largest on the planet. When something goes wrong somewhere in the world and battleships are needed, who ya gonna call? Japan? The whole basis of the article falls apart like a paper house in the face of a gale.
The USA is also still the largest marketplace in the world. No one even comes close. Everyone sells to the United States. When the U.S. stops buying, everyone suffers. Decoupling isn't even close to coming about in the next 5 decades so forget about the USA becoming an afterthought any time soon.
Know this: The U.S. will go through a slowdown for the next 3 years. It's inevitable and unavoidable. There will be at least two major bank consolidations in the next 18 months. The financial system won't be allowed to fail and U.S. financial institutions will get to raise even more capital from global investors. You know why?
The world can't afford to allow the U.S. to fail. Without the U.S., the world becomes a more dangerous and unstable place. Everyone and I do mean everyone needs the U.S. to remain stable and steady. Reply
How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
I think OIL is the new gold. Even though its volatile, it is still in an uptrend for many years to come.There are many factors to keep it going up:-
1. As the dollar value keeps depreciating due to the Fed's massive liquidity, both OIL and gold goes higher.
2. But oil is better since its a resource which is consumed and cannot be reclaimed unlike gold which has been accumulating over centuries.
3. Demand for oil is still increasing from the developing nations, whereas supplies are depreciating a fast rate. (Read "Twilight in the desert" about the issues with Saudi oil fields which supplies 25% of the world's oil)
The only thing that would break oil is some alternative energy source... but that is still way out in the future.
I think OIL stays high with occasional spikes and drops.
Buy USO as well as OIH and sit back and enjoy the ride. Reply
How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
There is only one way the massive debt of the US government can be liquidated....inflate it away by creating a worthless dollar. After which we have a 100:1 or maybe a 1000:1 reverse split on the old dollar into the new dollar. ReplyUlysses Cate
How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
The commentary and the comments are very well thought out and interesting. I'd just like to share some notes from the past:If [further] Inflation Comes
by Roger W. Babson 1950 edition Copyrighted 1937
Quote [page 113]
If the country goes into radical inflation, with any shortage
of commodities, then commodities in storage for
speculation will be confiscated, the same as our gold was
confiscated in 1933.
Quote [page 114]
My inclinations are to follow the advice of a friend of mine,
who, on November 6, 1940, said as follows:
"Roger, the election yesterday has many meanings,
but one thing is certain; anyone who has a nickel
had better keep his mouth shut during the next four years!"
Quote [page 115]
NO INDUSTRY PROVIDES A SAFE INFLATION HEDGE.
Hope this is of some benefit.
Reply
How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II [view article]
To All Gold Bashers:Let's not confuse "commodity prices" with "dollar-denominat... commodity prices." The unique aspect of the current situation is that the USD is the world's reserve currency and (currently) serves as a price gauge for oil etc. The pressure on the greenback is astronomical. Each mini-crisis we have seen (November Libor Lockup, Bear Stearns, Fannie/Freddie) have caused an observable crush of the dollar in real time until government intervened. If you are buying things will dollars, or holding assets in dollars, your future is dim, as the government is running out of ammo. USDX has been on life support since November. The coming wave of bank failures will kill it dead.
Was 70's "Stagflation"... a dress rehearsal for an "Inflationary Depression"? Ask the British is they enjoyed their displacement of Sterling as the world's reserve. What events transpired during that transition?
Does the US have a unique opportunity as a technological leader? Absolutely. Will our brilliant political leaders get out of the way and let us take advantage of it? What do you think? And if it happens, who will own the companies that do it? Us? Or the SWF's?
Either the market is free, or it isn't. If decisions could be made in an environment free of regulatory cronyism we could thrive. US Government has become to large too allow genuine competition, which includes failure. A lost decade it is then.
At least. Reply