Re: The Daily Reckoning - Buying Tokyo

verfasst von Fischli, 14.08.2003, 18:21

-->Comment:
Generally I do agree upon the conclusion to buy in depresive moods. Nevertheless, not necessarily"everyone"is a turnaround candidate and"everything" is a turnaround situation. Also specific circumsances that will have a huge impact on the timing has to be taken into account.
Actually, it could be possible that Tokyo is turning - but the question has tobe raised how likely it is - and by when?
Especially with regard to Japan, I have to admit, I do not believe in a turnaround soon. Reason is - as often outlined in other boards- the business attitude of Japanese. Ok, you are right - Japan already achieved a high level, why not again?
Because they don't have the same dedication and understanding of business as in fgormer times. And Japanese hardly like to change their attitudes.
Therefore, if not a real blasting event occurs that turns the mindset of Japanese upside down, I will not follow the general logic of a turnaround resulting in the fact that I will not invest in Tokyo. Maybe in 3-5 years... who knows.
By the way- the saying is:What goes up, must come down" - but I never have heard about a saying vice versa.....

fischli
(who was living for more than 5 years in Tokyo)
PS- sorry for stating in English, but I have almost finalized this comment after I became aware of it...must have been due to the text below)

>
>BUYING TOKYO
>By C. Alexander Green
>Japan is 14 years into an economic crisis. In fact, the
>world's second-largest economy has been stagnant for so
>long it has essentially abdicated its once-leading role in
>Asia and the global economy.
>There are several reasons for this. The country experienced
>a huge bubble in its stock market in the late 1980's. (In
>fact, this bubble bore more than a passing resemblance to
>the technology stock mania of the late 1990's.) In 1989,
>Japan's index - the Nikkei 225 - soared to 39,000 and more
>than 100 times earnings. It was accompanied by an equally
>magnificent real estate bubble.
>Unfortunately, Japanese banks were busy lending money
>against these pie-in-the-sky real estate values. More than
>a decade later, property prices in Japan have fallen over
>80%, devastating the Japanese banking system.
>In the early 1990's, the U.S. had its own massive problem
>in the savings and loan industry. The Resolution Trust
>Corporation was formed to clean house. And it did.
>Nothing like this has happened yet in Japan. So far, the
>country's inept political system has refused to address the
>problem. As a result, the Japanese economy stumbles along,
>zombie-like, while its bankrupt banking system continues to
>lend money to technically insolvent companies.
>Politicians in Japan have made the situation even worse.
>Rather than cutting taxes sharply to stimulate the economy
>early on, the government enacted huge spending programs to
>stem the economic decline. This involved massive public
>works projects, including highways that weren't needed and
>bridges to nowhere. In short, Japanese taxpayers saw more
>pork than the average butcher at Oscar Meyer.
>Needless to say, it didn't work. The dysfunctional banking
>system and the huge budget deficits resulted in a
>relentless deflation that has been eroding prices in Japan
>for over a decade. As a result, consumers - ever fearful
>that things will get even cheaper - refuse to spend. And
>that has caused the deflationary cycle to grow ever more
>vicious.
>In fact, things have gotten so bad that last year Moody's
>took the unprecedented step of downgrading Japan's credit
>rating from A1 to A2. That's lower that Botswana's.
>All in all, over the past decade and a half, Japan has seen
>the bursting of an investment bubble... a sickening
>deflationary crisis... a market index that has plummeted
>82%... and the emergence of a very black mood among
>consumers and investors. Yet for contrarian investors, now
>- when abject pessimism about the country's future is at
>its zenith - may actually be an historic buying
>opportunity.
>There is a strong case to be made that Japanese shares are
>greatly undervalued. For starters, the Japanese government
>is finally getting serious about banking reform. It's true
>the ruling Liberal Democratic party continues to try to
>foil the initiatives of the Koizumi government. But as the
>crisis has escalated, intense pressure to make meaningful
>changes to the banking system keeps growing.
>Secondly, real estate prices have now fallen much further
>than rents. Many Japanese properties now yield more than
>10% annually. That provides support for real estate at
>these levels and indicates a bottom is at hand. With
>returns this high, it's unlikely Japanese property values
>will fall dramatically from here.
>Another positive sign is that Japanese profits are already
>on the upswing. According to Morgan Stanley, profits for
>listed companies in Tokyo (excluding banks and other
>financial concerns) rose 80% in the fiscal year that ended
>in March.
>Yet by many measures, Japanese stocks are among the
>cheapest in the world today. An amazing 60% of Japanese
>listed companies have a market capitalization that is lower
>than the value of their net assets. (U.S. companies in the
>S&P 500, by comparison, sell for more than five times this
>much.)
>More importantly, every bit of bad news detailed above is
>already reflected in Japanese share prices. No one is going
>to sell Japanese stocks today based on the gloomy news of
>the past decade. But a glimmer of positive news - like
>genuine banking reform - would drive Japanese share prices
>substantially higher.
>And that may happen soon. The Japanese people have socked
>away more than $250 billion in cash. Unfortunately for
>these thrifty folks, Japanese government bonds pay only a
>smidgen more than nothing. (Mortgages of less than 1% are
>commonplace.) When the stock market begins to gather steam,
>huge sums of cash are likely to leap from the sidelines,
>adding fuel to the fire.
>As chief economist Stephen Roach of Morgan Stanley put it,
>"the Japanese consumer may represent the greatest source of
>pent-up demand for a major economy in the modern era."
>Finally, it's important to note that global money managers
>have managed to beat the international index over the past
>decade just by severely underweighting their exposure to
>Japan. If the Japanese market starts to take off, they will
>be forced to invest billions to keep from underperforming
>their benchmark.
>And let's not forget that Japanese stocks provide a
>wonderful dollar hedge. If the dollar falls 20% against the
>yen, for instance, Japanese shares will be worth 20% more
>in dollar-terms, even if the Japanese stock market goes
>nowhere.
>There is risk in this scenario. By backing away from
>meaningful banking reform, the Japanese political
>leadership may end up winning the Rubber Backbone Award. Or
>some other yet-unknown screw may come loose.
>For that reason, I'm recommending a conservative way to
>capitalize on a rebound in Tokyo: buy the whole market.
>Just as you can buy an index fund based on the Dow, the S&P
>500 or the Russell 2000, so too can you buy a publicly
>traded index fund that replicates the performance of the
>Japanese market. It's called the MSCI Japan Index Fund
>(AMEX: EWJ).
>This is the most heavily traded international index in the
>U.S. And it has plenty of liquidity, with more than $1
>billion in assets. It's made up of many companies you
>already know and patronize. For instance, the top ten
>holdings - which make up over a quarter of the fund -
>include Toyota, NTT DoCoMo, Canon, Sony, Honda and Nissan,
>among other well-known international brands.
>Buying the Japanese market today is contrarian investment
>at its boldest. But as investment legend John Templeton has
>often said,"the greatest bargains can only be found at the
>point of maximum pessimism."
>Sell New York. Buy Tokyo.
>
>Regards,
>C. Alexander Green,
>for the Daily Reckoning
>P.S. True, there is risk investing in Japan. But the
>potential upside more than justifies it.
>Japan's economic woes are well-publicized worldwide. So the
>average investor - to the extent that he considers the
>Japanese market at all - thinks investing in this part of
>the world is absurd. And that, of course, is why it's such
>a splendid contrarian investment opportunity.

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gesamter Thread:

• The Daily Reckoning - Buying Tokyo - Firmian, 14.08.2003, 17:09
  • Re: The Daily Reckoning - Buying Tokyo - Fischli, 14.08.2003, 18:21