Japan Archives - Page 3 of 3 - the patient investor

February 15, 2012

Default Therapy

Why not let an insolvent debtor default and invite capitalism to do its work?

That’s the process an Austro-Hungarian economist by the name of Joseph Schumpeter used to call “creative destruction”…and it has worked pretty well over the years, believe it or not…….

Consider the divergent fates of two countries that came face-to-face with a financial crisis in 1990. One of these countries is still merely muddling along…20 years later! The other country is flourishing.

That’s because one of these countries, Japan, responded to its crisis by coddling its crippled corporations and by throwing monumental sums of taxpayer dollars at failing financial institutions. The other country, Brazil, responded to its crisis with relatively savage measures. It defaulted on its debts, devalued its currency (more than once) and did not stand in the way of corporate failure. Brazil’s responses were far from perfect, but they were much less imperfect than were Japan’s……

Too bad for Japan. Its economy has muddled along for two decades, while its stock market has produced a loss of 2% per year across that entire 20-year timeframe. By contrast, the Brazilian economy and stock market have both boomed during the last two decades, despite some very serious bumps along the way.

via Default Therapy.

December 6, 2011

FRBSF Economic Letter: Asset Price Booms and Current Account Deficits

Just as the United States was not the only country posting a large current account deficit, so too it was not the only country that experienced asset price booms. Figure 2 shows that countries with large current account deficits in 2006 also tended to have larger house price increases. Of course, there are exceptions. For example, China has experienced rapid house price appreciation despite its enormous current account surplus. But, in general, house price appreciation and current account deficits appear to have been positively associated across many countries.

via FRBSF Economic Letter: Asset Price Booms and Current Account Deficits (2011-37, 12/5/2011).

Colin Twiggs: ~ There appears to be a general rule that large current account deficits lead to asset price booms. But to prove the rule researchers need to address why Japan experienced a massive asset price boom in the 1980s, and why China experienced a similar boom over the last decade, when both were running current account surpluses.

December 1, 2011

Japanese Yen

The two overriding features on the USD/Yen chart are the strong primary down-trend — as indicated by the descending trendline — and a strong bullish divergence on 63-day Twiggs Momentum warning of a reversal. Recovery above resistance at ¥80 would confirm the reversal.

JPYUSD

November 17, 2011

Yen set for a major reversal

This is a 20-year (monthly) chart of the US dollar against the Japanese yen. The dollar has declined in a primary down-trend since early 2008. Long-term support at 80 failed to halt the fall and the greenback is now ranging between ¥75 and ¥80. The down-trend is in its fourth year and large bullish divergence on 63-day Twiggs Momentum warns of a reaction. Penetration of the declining trendline would strengthen the signal and breakout above 80 would confirm, offering a long-term target of 100.

USDJPY

November 11, 2011

EconoMonitor : EconoMonitor » Europe Begins Its Endgame. Watch and Learn, for Europe’s Problems Are the World’s.

The current structure of Europe cracks under the slowly rising stress of vendor financing: export-based prosperity for some, debt-financed consumption by others. Unless reformed, this can only end badly. The global economy has similar imbalances. In 2010 the trade surpluses of China, Russia, and East Asia (China being half the total) were almost equal to the US trade deficit of $560 billion. OPEC, Germany, and Japan accumulated another $518 billion surplus. These numbers continue year by year, accumulating stress that will eventually break the current global financial order.

We should watch and learn from Europe’s experience in the months to come. We, and the rest of the world, may follow them sooner than we expect.

via EconoMonitor : EconoMonitor » Europe Begins Its Endgame. Watch and Learn, for Europe’s Problems Are the World’s..

October 31, 2011

The End of Population Growth – Sanjeev Sanyal – Project Syndicate

What demographers call the Total Fertility Rate is the average number of live births per woman over her lifetime. In the long run, a population is said to be stable if the TFR is at the replacement rate, which is a little above 2.3 for the world as a whole, and somewhat lower, at 2.1, for developed countries, reflecting their lower infant-mortality rates.

The TFR for most developed countries now stands well below replacement levels. The OECD average is at around 1.74, but some countries, including Germany and Japan, produce less than 1.4 children per woman. However, the biggest TFR declines in recent years have been in developing countries. The TFR in China and India was 6.1 and 5.9, respectively, in 1950. It now stands at 1.8 in China, owing to the authorities’ aggressive one-child policy, while rapid urbanization and changing social attitudes have brought down India’s TFR to 2.6.

…. it is likely that world population will peak at nine billion in the 2050’s, a half-century sooner than generally anticipated, followed a sharp decline. One could argue that this is a good thing, in view of the planet’s limited carrying capacity. But, when demographic dynamics turn, the world will have to confront a different set of problems.

via The End of Population Growth – Sanjeev Sanyal – Project Syndicate.

October 26, 2011

Richard Koo: The effect of de-leveraging after a banking crisis

This video from 2010 is particularly important. Richard Koo explains how the private sector paying off debt leads to a rapid contraction in national income.

INET interview with Richard Koo, Chief Economist at Nomura Research

September 21, 2011

QE Can’t Save the Day… We’ve Done a Version of It For Over 10 Years | ZeroHedge

While most commentators proclaim that QE is a completely new phenomenon, we have in fact seen a version of it in the form of the Fed’s and Asia’s (especially China’s) purchases of US Treasuries/ currency pegs over the last decade or so.

Indeed, today, the Fed, China, and Japan collectively hold 61% of the $10 trillion of US debt held by “the public.” When you add in the additional $4.6 trillion in US debt held by “intragovernmental holdings” (basically the Federal Government buying Treasuries by raiding Social Security and other pension funds) you find that Asia and the Feds have monetized $10.7 trillion of the US’s total $14.6 debt (roughly 73%) over the last 20 years.

via QE Can’t Save the Day… We’ve Done a Version of It For Over 10 Years | ZeroHedge.

August 22, 2011

Asia slides

The Dow Jones Japan Index closed Monday below last weeks low, indicating a down-swing to 46*. The 21-Day Twiggs Money Flow peak deep below zero warns of strong selling pressure.

Dow Jones Japan Index

* Target calculation: 50 – ( 54 – 50 ) = 46

Dow Jones South Korea Index has already broken short-term support at 380 and is headed for the 2010 low at 330*. 13-Week Twiggs Money Flow below zero confirms strong selling pressure.

Dow Jones South Korea Index

* Target calculation: 380 – ( 430 – 380 ) = 330

Dow Jones Taiwan Index has also broken support, at 177, and will test the 2010 low at 168. 13-Week Twiggs Money Flow below zero again warns of strong selling pressure.

Dow Jones Taiwan Index

* Target calculation: 180 – ( 195 – 180 ) = 165