Comments on: The lesson from Japanese Stocks http://www.canadiancapitalist.com/the-lesson-from-japanese-stocks/ Helping you invest and prosper Sun, 12 Feb 2012 00:54:40 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Mark http://www.canadiancapitalist.com/the-lesson-from-japanese-stocks/#comment-183928 Mark Fri, 06 Mar 2009 02:48:20 +0000 http://www.canadiancapitalist.com/?p=1800#comment-183928 I posted a link to a great article on the lessons learned during Japan's banking, real estate, credit deflation... http://www.planbeconomics.com/2009/02/11/lessons-from-japan/?preview=true&preview_id=570&preview_nonce=49d2e18552 I posted a link to a great article on the lessons learned during Japan’s banking, real estate, credit deflation…

http://www.planbeconomics.com/2009/02/11/lessons-from-japan/?preview=true&preview_id=570&preview_nonce=49d2e18552

]]> By: Philip in North York http://www.canadiancapitalist.com/the-lesson-from-japanese-stocks/#comment-183354 Philip in North York Sun, 01 Mar 2009 04:21:52 +0000 http://www.canadiancapitalist.com/?p=1800#comment-183354 West Coast FP: Your last point reminds me about a box of snacks. Long time ago, my grandpa used to bring one or two boxes of cookies, snacks, and sweets from shareholder meetings of a confectionery company. He explained to me that the box was "company's gift to shareholders. " 10 years later I learned that I had some shares in that company through him. Back then, I didn't know stocks, dividend and shareholder, but that boxes of snacks were the best dividend payments for 9 year old kid! West Coast FP: Your last point reminds me about a box of snacks. Long time ago, my grandpa used to bring one or two boxes of cookies, snacks, and sweets from shareholder meetings of a confectionery company. He explained to me that the box was “company’s gift to shareholders. ” 10 years later I learned that I had some shares in that company through him. Back then, I didn’t know stocks, dividend and shareholder, but that boxes of snacks were the best dividend payments for 9 year old kid!

]]> By: Intelligent Speculator » Blog Archive » Investment Talking http://www.canadiancapitalist.com/the-lesson-from-japanese-stocks/#comment-183299 Intelligent Speculator » Blog Archive » Investment Talking Sat, 28 Feb 2009 13:03:11 +0000 http://www.canadiancapitalist.com/?p=1800#comment-183299 [...] Canadian Capitalist tells us a lesson from the Japanese Stocks. [...] [...] Canadian Capitalist tells us a lesson from the Japanese Stocks. [...]

]]> By: West Coast FP http://www.canadiancapitalist.com/the-lesson-from-japanese-stocks/#comment-183236 West Coast FP Fri, 27 Feb 2009 21:35:22 +0000 http://www.canadiancapitalist.com/?p=1800#comment-183236 You have to be careful when making comparisons between the equity markets of different countries as the socioeconomic factors do not often translate well. A few things you have to consider about the Japanese market. Given the lack of transparency there was it possible for large brokerage houses to rig the markets in conjunction with their large customers? If the bubble was manufactured for the benefit of Nomura etc... and their customers, then its a transfer of wealth from the middle/lower classes to the rich. In that context a bubble makes sense. Sound familiar? Japan during this time was restructuring their welfare society. Companies in Japan previously had little concern for their shareholders and stock price as their primary responsibility was to support their workers and their towns. A secondary company function was to support other related companies by holding their shares and supporting their share prices. As a result the valuations were completly off by any western standard. There are many other differences as well. Did you know that dividends are still often paid with product? If you invest in MacDonalds, for example, you might get burger coupons on a quarterly basis and so forth. You have to be quite careful when you are considering investing overseas. You have to be careful when making comparisons between the equity markets of different countries as the socioeconomic factors do not often translate well.

A few things you have to consider about the Japanese market.
Given the lack of transparency there was it possible for large brokerage houses to rig the markets in conjunction with their large customers? If the bubble was manufactured for the benefit of Nomura etc… and their customers, then its a transfer of wealth from the middle/lower classes to the rich. In that context a bubble makes sense. Sound familiar?

Japan during this time was restructuring their welfare society. Companies in Japan previously had little concern for their shareholders and stock price as their primary responsibility was to support their workers and their towns.
A secondary company function was to support other related companies by holding their shares and supporting their share prices. As a result the valuations were completly off by any western standard.

There are many other differences as well. Did you know that dividends are still often paid with product? If you invest in MacDonalds, for example, you might get burger coupons on a quarterly basis and so forth.

You have to be quite careful when you are considering investing overseas.

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/the-lesson-from-japanese-stocks/#comment-183183 Canadian Capitalist Fri, 27 Feb 2009 14:32:44 +0000 http://www.canadiancapitalist.com/?p=1800#comment-183183 rm: Obviously, I wasn't very clear on the point I'm making. It is that when valuations are too "high", future stock returns can be expected to be modest. But what I find astonishing is that despite a fall from 40,000 to 8,000, Japanese investors putting money regularly to work were slightly positive to slightly negative. Granted that isn't much to write home about for investing over 20 years but it is a markedly different outcome than saying Japanese stock lost 80% of value over 20 years. But keep in mind that this is investing in Japanese stocks and nothing else. Now, I believe investors need to diversify by holding other asset classes such as bonds, a bit of cash, REITs and also diversify stocks globally. They also need to keep expenses low, not chase performance and rebalance their portfolios occasionally. Doing all these little things right puts the odds markedly in favour of the investor. rm: Obviously, I wasn’t very clear on the point I’m making. It is that when valuations are too “high”, future stock returns can be expected to be modest. But what I find astonishing is that despite a fall from 40,000 to 8,000, Japanese investors putting money regularly to work were slightly positive to slightly negative. Granted that isn’t much to write home about for investing over 20 years but it is a markedly different outcome than saying Japanese stock lost 80% of value over 20 years.

But keep in mind that this is investing in Japanese stocks and nothing else. Now, I believe investors need to diversify by holding other asset classes such as bonds, a bit of cash, REITs and also diversify stocks globally. They also need to keep expenses low, not chase performance and rebalance their portfolios occasionally. Doing all these little things right puts the odds markedly in favour of the investor.

]]> By: A Lap Of The Blogs : WhereDoesAllMyMoneyGo.com http://www.canadiancapitalist.com/the-lesson-from-japanese-stocks/#comment-183159 A Lap Of The Blogs : WhereDoesAllMyMoneyGo.com Fri, 27 Feb 2009 04:14:19 +0000 http://www.canadiancapitalist.com/?p=1800#comment-183159 [...] Canadian Capitalist looks at the lessons that can be learned from the Japanese stock market. [...] [...] Canadian Capitalist looks at the lessons that can be learned from the Japanese stock market. [...]

]]> By: Phil S http://www.canadiancapitalist.com/the-lesson-from-japanese-stocks/#comment-183157 Phil S Fri, 27 Feb 2009 03:14:16 +0000 http://www.canadiancapitalist.com/?p=1800#comment-183157 My point is that the stock market doesn't remember what price that you (or anybody else, for that matter) bought a stock at, so there is no guarantee that it will ever go back to that price. Just ask anybody who still holds Nortel stocks today. A stock which has fallen 80% to the price where it is today has just as much chance to go 5x in price back to its peak value as a stock of a new company trying to make it in the world. But human nature THINKS that the stock which fell will get back to where it was, whereas we THINK that a new stock will never get anywhere. My point is that the stock market doesn’t remember what price that you (or anybody else, for that matter) bought a stock at, so there is no guarantee that it will ever go back to that price. Just ask anybody who still holds Nortel stocks today.

A stock which has fallen 80% to the price where it is today has just as much chance to go 5x in price back to its peak value as a stock of a new company trying to make it in the world. But human nature THINKS that the stock which fell will get back to where it was, whereas we THINK that a new stock will never get anywhere.

]]> By: rm http://www.canadiancapitalist.com/the-lesson-from-japanese-stocks/#comment-183154 rm Fri, 27 Feb 2009 00:28:11 +0000 http://www.canadiancapitalist.com/?p=1800#comment-183154 Yes, that's exactly my point. But the point of your article seems to miss the lesson from Japanese stocks...and that's that simple buy-and-hold of even a cheap index fund risks the Japanese Nikkei results of basically flat returns for decades. Yes, that’s exactly my point. But the point of your article seems to miss the lesson from Japanese stocks…and that’s that simple buy-and-hold of even a cheap index fund risks the Japanese Nikkei results of basically flat returns for decades.

]]> By: EconStudent http://www.canadiancapitalist.com/the-lesson-from-japanese-stocks/#comment-183103 EconStudent Thu, 26 Feb 2009 16:58:09 +0000 http://www.canadiancapitalist.com/?p=1800#comment-183103 CC: Jeremy Grantham says Japanese stocks are very undervalued at this point after a 20 year bear market. Japanese companies have some of the healthiest balance sheet and Jeremy Grantham says Japanese companies can be considered blue chip companies at this point. Overweight Japanese market seems like a good idea. CC: Jeremy Grantham says Japanese stocks are very undervalued at this point after a 20 year bear market. Japanese companies have some of the healthiest balance sheet and Jeremy Grantham says Japanese companies can be considered blue chip companies at this point.

Overweight Japanese market seems like a good idea.

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/the-lesson-from-japanese-stocks/#comment-183102 Canadian Capitalist Thu, 26 Feb 2009 16:25:12 +0000 http://www.canadiancapitalist.com/?p=1800#comment-183102 Phil: It is true that estimating future earning isn't a hard science and I'll admit that based on trailing earnings, I thought stocks were reasonably valued in 2007 to deliver modest returns that were still better than bonds. But it is clear that even based on trailing earnings, stocks were clearly overvalued in 2000. S&P trailing P/E was greater than 33 in 1999, Nasdaq traded at more than 100. I still recall that valuations of big-cap tech stocks were considered "reasonable" when the price-to-sales ratio was 10! Canadian Money: I have no idea how carefully timing the markets qualifies as a buy-and-hold strategy. rm: I don't have total return data or inflation data for the Nikkei. So you'll have to take the following with a large dose of salt. Assume you invested 1000 yen every year since 1993. You'll have a grand total of 990 yen in *profit* at the end of 2008. i.e. Total investments made: 16,000. Value of portfolio 16,990. Other starting years and the profits/losses are as follows: 1994: 1085 1995: 1207 1996: 1430 1997: 1660 1998: 1869 That sounds great but keep in mind that investors who started out earlier aren't very happy with the results: 1985: -782 1986: -1108 1987: -1278 1988: -1091 SP: Markets are usually efficient but it is clear that they are not always efficient. As Warren Buffet says this makes all the difference. I have no problems accepting that. Dividend Growth Investor: I read yesterday that Japanese stocks lost 96% in value in the decade following 1939 due to the Second World War. From 1900 to 2008 Japanese stocks returned a real 3.8% but with much higher volatility. I don't think that is shabby at all. I also draw the conclusion that the Japanese experience teaches us to diversify globally. Phil: It is true that estimating future earning isn’t a hard science and I’ll admit that based on trailing earnings, I thought stocks were reasonably valued in 2007 to deliver modest returns that were still better than bonds. But it is clear that even based on trailing earnings, stocks were clearly overvalued in 2000. S&P trailing P/E was greater than 33 in 1999, Nasdaq traded at more than 100. I still recall that valuations of big-cap tech stocks were considered “reasonable” when the price-to-sales ratio was 10!

Canadian Money: I have no idea how carefully timing the markets qualifies as a buy-and-hold strategy.

rm: I don’t have total return data or inflation data for the Nikkei. So you’ll have to take the following with a large dose of salt. Assume you invested 1000 yen every year since 1993. You’ll have a grand total of 990 yen in *profit* at the end of 2008. i.e. Total investments made: 16,000. Value of portfolio 16,990. Other starting years and the profits/losses are as follows:
1994: 1085
1995: 1207
1996: 1430
1997: 1660
1998: 1869

That sounds great but keep in mind that investors who started out earlier aren’t very happy with the results:

1985: -782
1986: -1108
1987: -1278
1988: -1091

SP: Markets are usually efficient but it is clear that they are not always efficient. As Warren Buffet says this makes all the difference. I have no problems accepting that.

Dividend Growth Investor: I read yesterday that Japanese stocks lost 96% in value in the decade following 1939 due to the Second World War. From 1900 to 2008 Japanese stocks returned a real 3.8% but with much higher volatility. I don’t think that is shabby at all. I also draw the conclusion that the Japanese experience teaches us to diversify globally.

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