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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (2256)	3/6/2001 12:02:17 AM
From: Wyätt Gwyön	Respond to of 74559

Can not single out just real estate and compare that way, as the Japanese had more of a land crunch, higher savings, and lower interest rate to support that single aspect of the bubble I believe the real estate bubble in Japan was much more severe than here, save for certain areas like the Silicon Valley. Even compared to the Silicon Valley, though, the insane prices for Tokyo commercial real estate defied comprehension. The RE bubble in Japan was exacerbated by tax laws that imposed heavy penalties on cap gains from quick sales. Thus people were encouraged to hold on, artificially limiting supply. Also, much ridiculous limiting of where building was allowed. In that way, similar again to Bay Area. I have difficulty understanding why Japanese commercial activity is so concentrated in just a few areas, while other areas go begging for tenants. I suppose it has to do with the farmers and their political power. The Japanese seem to think they need to have all these old people planting rice by hand and taking up valuable living space, so that they can be "self-sufficient" foodwise. I think this is complete BS farmer propaganda. They will always have to import food. At the height of the bubble, when the Imperial Palace grounds were supposedly worth more than all of Canada, I was able to rent a new studio apartment for ~$250/month just an hour by bus from Tokyo. That is to say, I believe their "land crunch" was and is to a large extent artificial, i.e., "manmade". If they just industrialized more of their farm areas, normal people could buy houses. Even now, rents in Tokyo (save the most expensive districts) are very cheap compared to the cost of buying. RE bubble is a great one, because most people have the bulk of their assets tied up in RE as opposed to financial assets. That is a feeling on the individual level. On corporate level, substition of bloated RE assets for cash flows as loan collateral was the key circularity to their credit bubble. In contrast, key to our credit bubble was not even backed by bloated assets, but just bloated promises to the capital markets. What did a dotcom CEO have to offer as collateral to collect a billion from the market place? Just a slide show. Enough people believe and it works. Until it stops working.