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What Can We Learn From The Japanese?
Old 08-03-2011, 05:20 PM   #1
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What Can We Learn From The Japanese?

Some 20 years ago I pondered the situation of an average working person in Japan. Here was a big run up in the the real estate and stock market. It was obvious to a lot of people that it was not sustainable even without having a good idea of what would be a proper valuation or when to jump into/out of the market. What could this person have done?Invested more in international funds? Borrow cheap money for investments?

Like many others I see the US headed in a similar direction in the valuation of real-estate and stocks. I hope we are not headed for 20 years of stagnation. Was anything learned from the Japanese? I understand most corporations and individuals in Japan buy Japanese govt bonds which pay poorly. Buying US govt bonds are not an identical issue because of the size of the market but is it a good idea to diversify to foreign bonds?

IMHO Japan has done pretty well in living through financial and natural disasters due to the nature of their society. The US has different strengths and weaknesses. My question is not a national political question, its a question about what a small investor/working person can do with available financial choices.

So what can still be learned form the Japanese? Is a different asset allocation warranted? More international stocks & bonds? Buy or avoid real estate? Borrow money or avoid debt? Anything else? If nothing obvious to invest in is there something specifically to avoid?
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Old 08-03-2011, 06:26 PM   #2
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Quote:
Originally Posted by yakers View Post
Some 20 years ago I pondered the situation of an average working person in Japan. Here was a big run up in the the real estate and stock market. It was obvious to a lot of people that it was not sustainable even without having a good idea of what would be a proper valuation or when to jump into/out of the market. What could this person have done?Invested more in international funds? Borrow cheap money for investments?

Like many others I see the US headed in a similar direction in the valuation of real-estate and stocks. I hope we are not headed for 20 years of stagnation. Was anything learned from the Japanese? I understand most corporations and individuals in Japan buy Japanese govt bonds which pay poorly. Buying US govt bonds are not an identical issue because of the size of the market but is it a good idea to diversify to foreign bonds?

IMHO Japan has done pretty well in living through financial and natural disasters due to the nature of their society. The US has different strengths and weaknesses. My question is not a national political question, its a question about what a small investor/working person can do with available financial choices.

So what can still be learned form the Japanese? Is a different asset allocation warranted? More international stocks & bonds? Buy or avoid real estate? Borrow money or avoid debt? Anything else? If nothing obvious to invest in is there something specifically to avoid?
Usually though not always there are reasonable if not wildly great buys in most markets. Certainly not in Japanese export oriented stocks in the late 80s, or in Japanese real estate. My memory is that savings account and CD rates in Japan were not bad back then. (But my only knowledge of it was talking to Japanese people at parties.) Every Japanese that I met during this time was too busy getting rich in the stock market or Tokyo real estate to even think about savings accounts. And this is the problem, we are herd animals. Whatever we may tell ourselves, it is usually very hard to depart from the herd.

In the US today, certainly much residential real estate is anything but overpriced. And stocks? Some overpriced, some more or less OK, some quality goods selling at or close to March 2009 levels. IMO, the overall market is no raging bargain. True generational securities buys are hard to impossible to find with interest rates as low as they are, since interest rates are fundamental to valuation- though not necessarily to assessing how much you might make or lose on a purchase.

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Old 08-03-2011, 06:50 PM   #3
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When I talk to Japanese about their retirement plans, it turns out that most if not all of them are not investors. They get government-sponsored pensions or payouts much like our Social Security benefits. They do not aspire to retire early and they do not worry about health care. Everything is taken care of by the nice government and there really is nothing to worry about.

So what to learn from the Japanese: The Government will provide for you in your old age, so don't worry about saving or investing.
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Old 08-03-2011, 07:11 PM   #4
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Bill Gross thinks that diversifying to foreign bonds (especially emerging market bonds) is a good idea.
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