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Japan Doesn't Want to Play

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December 17, 2007 – Comments (13)

Last when I read that the US was trying to get Japan to buy $15 billion of subprime paper to help the liquidity of the market it crossed my mind that that wasn't going to go over well.  After all, Japan and done nothing but languish since their housing bubble burst in 1989.

And look at this quote:

"What did America do when we had our non-performing loan problem? They just pushed us into the corner. European banks also ran away. Why should Japan now shoulder this burden?" said the megabank executive. "But this is a decision made at a high political level and could end up defying logic."

They had to dig them selves out without help from the international community so I can't says I blame them a bit.

Read up about Japan's asset price bubbleCan it happen hereCan/did we learn a lesson hereIt's a conspiracy.

What did Floridabuilder say about his uncle?  A proper bought for $1 million sold for half a million 30 years later?   

So, I'm betting this belief "The Stock Market Always Goes Up" is going to be sorely tested as well.  Put your 2c in for charity.  Motley Fool is donating 2c for each reply for the month of December.

13 Comments – Post Your Own

#1) On December 17, 2007 at 10:35 AM, zygnoda (26.74) wrote:

The stock market has gone up just a wee bit since the depression.  It will rise again (unless the country suffers a total collapse).  

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#2) On December 17, 2007 at 1:59 PM, eskatonic (29.40) wrote:

2c

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#3) On December 17, 2007 at 3:41 PM, GS751 (27.53) wrote:

the collapse is inventiable unless some drastic changes are made.

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#4) On December 17, 2007 at 4:39 PM, abitare (52.70) wrote:

dwot,

The Japanesse are not stupid. Japan is a very safe country.

The Japanesse deflation is how I think the US real estate and stock market will play out in the US. Except, the US has millions of migrants coming into the US in every year.  The migrant issue will be interesting, as jobs become more scarce and more people compete for jobs. 

There almost NO immigrants in Japan, except Thai and Philiapino "entertainers". The maid, janitors, farm labor etc... work is done by Japanesse.

You are up 370+ points! I am just up +212. My choice of underperforms is not the best. I did the dumbest thing last Tues, before Helicopter Ben lowered rates. I closed 60+ underperforms, in case the market went up. I got crushed last time H.B. lowered rates. It cost me atleast +500 points and 5% accuracy. 

I want to underperform some more companies and outperform some Ultra Shorts, but I have used all 200 spots.

I see a deflation and a bear market. Many Americans  are maxed out. The government is maxed out on spending. The dollar is moving to garbage. Foreigners are maxed out on US debt. The US is overbuilt, over borrowing and is still building and spending. 

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#5) On December 17, 2007 at 5:04 PM, renegade49 (90.61) wrote:

...and it will not stop until we are totally broke.  Most americans can't stop overspending and will vote for any candidate for president that assures them they can continue as it is their birthright.  "Fat and stupid is no way to go through life"  said the Dean in Animal House.  Seems to describe the average American these days.

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#6) On December 17, 2007 at 8:26 PM, GS751 (27.53) wrote:

Gotta love Ron Paul we need direct intervention if we are going to keep this country from going bankrupt.

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#7) On December 17, 2007 at 8:58 PM, StockSpreadsheet (74.71) wrote:

I believe that one of the problems that Japan's banks had, (and one reason that we refused to play with them), is that the Japanese banks refused to mark down their assets that were non-performing or grossly overvalued, ("marked to fantasy" I believe is what Warren Buffet called it).  Part of this was that due to the interlocking directorships and "family of companies" aspect in Japan, (I think it is called Kiretsu or something like that), that the banks would have been foreclosing on their sister companies or on companies run by members of their boards of directors.  Instead of doing this, the Japanese banks just kept rolling over the debt and renegotiating the terms until inflation caught up with the overvalued assets to where they weren't as overvalued anymore.  While I believe that a lot of our banks and brokerages still have a lot of "marked to fantasy" Tier 3 assets on their books, they have written off billions of dollars of assets and are expected to write off billions more.  I think this is a big difference between our bad debt/loans in our bubble and their bad debt/loans in their bubble. 

I could be wrong though.   

Craig 

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#8) On December 17, 2007 at 9:47 PM, dog1350 (75.76) wrote:

I think Japan and the USA have encountered a housing bubble but their responses will be entirely different .Heck, they will probably buy some sub prime paper. Totally different cultures and times.

Interesting enough I’ve learned that Caps is a reasonable cross section of stock picking opinions, some through blogs but most with their stock picks.

Caps is pointing to a serious problem with our economy and until we see a shift in bear picks to more moderate bull/bear picks the problem will persist.

I think that is what DWOT is polling each time she blogs. Always looking for some indication that the market is changing and where it is going. That is how winners win. I hope that through playing this game, I learn how to win. The top scorers are there because they do their homework. I like to learn and hate to lose. I might even short some stocks. My 2 cents worth…D

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#9) On December 18, 2007 at 1:11 AM, dwot (97.09) wrote:

zygnoda, I worked out from the peak in 29 the annualized increase in the Dow would be 4.6%.  It is 8% from the bottom in 32.

 GS751, I think it is going to be ugly...

 abitarecatania, I think the hard time the Japanese have had due to their bubble is very recent and still very strong on their minds and they know how much help they got.

  renegade49, I have family in the US and I mentioned last June this was coming and China is going to bail the world out.  I don't it at all.  The economy may very well be growing rapidly, but when the cost of food is growing twice as fast as the economy, that says spending is going to contract.

TMFSpreadsheet, I have not studied it so I'm not sure either.  I have no idea how to turn the bold off...  I never turned it on...

  dog1350, I look at the level of debt and I look at the countries that have hurt and every last one of them is because of debt.  The US debt is massive and it is increasing by about $3k per person each year.  You have massive household debt, massive government debt, and an insolvency problem.  The way you win in this market is you pay off your debt.

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#10) On December 18, 2007 at 6:07 AM, camistocks (< 20) wrote:

Craig, I completely agree. US companies don't shy away from writing down billions of dollars immediately, even more than would be really needed. So they can after a few months suddenly find some value again and get a bonus.

Asians don't like to "lose their face" or so I'm told, so Japanese banks kept their bad loans on their books instead of writing them of.

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#11) On December 18, 2007 at 8:51 AM, dwot (97.09) wrote:

I doubt very much that enough money has been written off at this point. 

I posted a link over on floridabuilder's blog to a story about a California home that sold for $481k in 2006 that didn't get sold at auction for $240k.  I'd have thought that if you were a first mortgage holder you'd be reasonably safe, but clearly the first mortgage holder on this one has lost at least 1/3rd of principal plus any carrying and closing costs should they find a buyer for the home.

I don't know if that example was hand picked as the most extreme or a typical example, but that is a major insolvency problem. 

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#12) On December 18, 2007 at 9:12 AM, dwot (97.09) wrote:

Lets say 5% of prime mortgages are in that kind of trouble.  So, that means 1.67% loss, and banks are leveraged 30 to 1 so 50% loss...

Holy crap, my heart damn near stopped.  Where do you hide from this?  Where do you hide? 

For sure banks are going under, and probably quite a few.  Right about now would be a good time to be working personal networks to find out which banks refused loans because those banks are going to be the lessor losers.  But it appears the easy money was so easy, even lending that looked like it had good risk management built into it is going to take some big hits.

Heck, it looks like a bank could have limited lending to 75% and if people had their own money for that other 25%, well chance are even if everything suggests their property value is going to go down further, they would hang on because of their stake in their home.  But, what of getting a second elsewhere?  Now the stake is gone and the risk is up.

The difference in the default risk for a property that has say declined 35% for a homeowner that had 25% and one that has second mortgages is enormous.  Human psychology is such that people will hang on rather than accept a realised loss even if the math says they would lose less by not hanging on.

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#13) On December 18, 2007 at 12:36 PM, dwot (97.09) wrote:

http://www.safehaven.com/article-9051.htm

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