RE: "The parallels between how it happened here [Japan] years ago and what's happening in the US are
eerie."
Can you expand on some of the parallels?
>>> Stock market soaring, extreme confidence in business outlook, low interest rates, no domestic inflation, high savings rate (though I'll grant you in the US the big savings seems to be mostly among the top earners and not uniform across society as it was in Japan). BTW, I'll grant there are differences too.
RE: " The government has lowered rates for years to try to stimulate the economy and it doesn't work."
Why doesn't it work? In your opinion, what will bring Japan out of its funk?
>>> When people have lots of savings, and are consumption averse by nature, low borrowing rates don't entice them to buy things they don't really want or need. A BMW loan at 1% is really just a further discount off the purchase price (deflationary) to someone who has a savings account earning 2-3%. It's like the dealer put the BMW on sale for 1-2% off with his financing. Certainly wouldn't cause me to run out and buy one unless I already was planning it.
Oh, BTW at lunch today my coworkers told me the birth rate is declining and family formation is declining too. The society is aging fast and by around 2010 (I can't remember the year exactly) it will take a 40% tax on all domestic wages to pay retirement/medical benefits alone since there will be so many retired people and so few working. I'll have to ask tomorrow and see if I can get the figures again, but it was startling. Japan has our Social Security/Medicare disease, but at a much advanced stage.
No wonder they are all so depressed. High taxes, stagnant economy, stifling culture, and now this! My 30-something peers will end up paying over 60% in total taxes on their earnings to support the aging. I think I'd emigrate fast if I was a young Japanese, and some of that will happen here and just make it worse!
Now the government is running ads to promote marriage, family formation, and the joys of parenting to try to counteract the problem long term. Something else they want you to do for your country, generate replacement contributors for the social security system! (Also see similar government ads all over Singapore now, right next to the ones telling them to be more courteous!)
RE: "Everyone seems afraid of a 1987 crash. I'm afraid of a 10 year bear."
Do you worry that the 10-year bear will be caused by deflation? Do you have an investment plan for a
10 year bear? i.e., if you think a 10 year bear is approaching, where will you put your money?
>> Yes, it's one of the possibilities.
The second question is easy. If you expect a deflationary bear, you want 30 year treasuries, even better, zero coupon 30 year treasuries. As many as you can buy. You will get rich as rates get lowered again and again by the government trying to stimulate the economy to health.
If you expect an inflationary bear, you want commodities, real estate, etc.
By definition, if it is ANY "bear", you don't want stocks or stock mutual funds! |
