
The Japanese have embarked on an intriguing and desperate monetary policy - lorax
http://www.businessinsider.com/mauldin-mortgage-in-yen-2013-6
======
Roboprog
I miss being able to buy high quality electronics from Japan that would last
20 years, instead of crap from China. I recently got a stereo for my home
office in the garage. I went to a local thrift store to get an older receiver
made in Japan, instead of China. It (still) works great.

Japan as a country needs to run a consumer oriented advertising campaign: "Buy
stuff from us instead of China, it will last 10 times as long!" They also need
to find a way to make their stuff available again in US (and other) commercial
outlets.

~~~
olalonde
> instead of crap from China

Did you know that iPhones, Xboxes, ThinkPads (the only laptop certified for
use on the International Space Station) and loads of other quality electronics
are made in China? I wouldn't say "made in China" automatically implies it's
crap.

~~~
ww520
Selective bias. People got what they paid for. They paid little for the cheap
stuff and complained about the poor quality.

~~~
Roboprog
I'm writing this on a MacBook, but who knows how long it will last. Maybe it's
a high quality device, and maybe I'm not supposed to care if it starts flaking
out after 2 or 3 years. I like the software, and the exterior construction is
nice.

Stuff made in China might be half price from what things used to be, but it's
hard to find any alternatives now.

------
msluyter
So, any time an article like this comes along, I think something like
"interesting, I guess I should go out and short the Yen... but wait, if
_everyone_ is already shorting the Yen, won't that already be baked into the
price?" s/Yen/Gold/g or whatnot.

I've sometimes thought that I should just bet against all seemingly persuasive
investment articles like this one on the principle that the market will
essentially over-indulge in said advice and have to correct in the opposite
direction. (Would be interesting to test that theory with historical data.)
Case in point: I bought a few silver ETF shares a while ago on the theory
stated (by lots of people like SeekingAlpha and the like) that quantitative
easing will cause inflation and people will rush to precious metals. (Well,
that and I probably have a thing for silver/gold.) Since then, it's dropped
over a third. Now I'm a little more cautious about betting on macro-economic
trends...

~~~
yajoe
Love the idea. The rub is figuring out _which_ article will influence people
(100s are written every day at Seeking Alpha for many views of the same issue)
-- if you can predict influence then I think you've found a nice little money
machine :)

------
drblast
Given a massive amount of debt and a problem with deflation, isn't Japan in an
ideal position for an aggressive negative income tax?

Imagine inflating by printing money and distributing equally among all
citizens. Domestic price increases would be offset by the extra cash and the
real debt would decrease accordingly. Why would that not work?

~~~
anentropic
It probably would, however it sets a terrible example and must never be
allowed to happen anywhere at any cost

"distributing equally among all citizens."

good grief, what a dangerous idea!

------
slacka
>Go ahead and buy stocks, says John Mauldin--if you've got a 10-year time
horizon. If you don't, don't. Because it's just another sucker's rally. -John
Mauldin March 2009

John Mauldin seems to have a spotty track record. He correctly called the
summer 2008 rally as a bull trap.[1] However, he failed to call the 2009 low,
and has been calling a top for the past few years.[2][3]

Eventually I'm sure he'll get it right, and there will be another market
crash. But if you listened to him in 2009 [3], you would have missed out on a
250% increase in your portfolio over the past 4 years.

Based on 4 year boom/bust business cycle, I actually think the market is
overdue for a serious correction to 1200-1400 S&P in the next year, but I
don't see any doomsday scenario playing out in the next 5 years.

[1][http://www.businessinsider.com/prepare-now-there-is-so-
much-...](http://www.businessinsider.com/prepare-now-there-is-so-much-that-
could-push-us-into-another-2008-crisis-2011-9)
[2][http://www.investorsinsight.com/blogs/john_mauldins_outside_...](http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2008/06/16/the-
road-to-revulsion.aspx) [3][http://www.businessinsider.com/henry-blodget-just-
a-suckers-...](http://www.businessinsider.com/henry-blodget-just-a-suckers-
rally-says-john-mauldin-2009-3)

------
mpyne
These types of strategic economic articles have always fascinated me. But I
have to ask, what _can_ the Japanese do about that high retiree:worker ratio?
As the article mentions, they aren't the only country with that issue.
Presumably there is some solution other than "sit there and suffer" or to push
the retirees off onto an ice floe.

~~~
yxhuvud
Be more generous to people with kids, thus making people get more kids.

More days off, more money, more kindergartens etc.

~~~
hga
The decline in Japanese fertility has been going on for 40 years now, one
wonders what it would take.

Various authors I read say no society has ever recovered from their (beyond)
"lowest low" fertility rate.

~~~
yxhuvud
The one we have here in Sweden have recovered quite a bit since the lowest
lows, but it still isn't above 2.0 per woman.

~~~
hga
Interesting. Fortunately you didn't hit what demographers call "lowest low", a
rate of 1.3, and as you say, you're climbing back from your nadir of 1.50, now
bouncing at or a bit above 1.90 per Wikipedia. I have heard of various things
the government has done to encourage child bearing; congratulations on
deferring and very possibly avoiding societal death.

------
digitalengineer
TL;DR: shorting the Japanese government is the trade of the decade. (According
to the author). "Will I succeed? Time will tell, but I am joined by Japanese
public pension funds that have announced they will reduce their holdings of
local bonds while increasing their share of both domestic and, in particular,
foreign equities. No time frame was provided in the data I saw, although
indications are that they have already started."

Of course- als always- _timing_ is everything.

------
krakensden
The question, 'can a great nation fail to inflate its own currency?', seems a
little silly. I'm reminded a little bit of Brad DeLong's 'widowmaker':

[http://delong.typepad.com/sdj/2013/05/the-washington-
super-w...](http://delong.typepad.com/sdj/2013/05/the-washington-super-whale-
hedge-fundies-the-federal-reserve-and-bernanke-hatred.html)

------
skybrian
This doesn't make sense. Not enough workers but demand for their work output
goes down? They can't both be problems.

~~~
rfugger
The workers, as a group, are the main consumers of their own output.

~~~
skybrian
A lower ratio of workers to seniors is supposed to be a problem because the
workers need to produce stuff both for themselves and for non-workers. It's an
argument that there will be too much demand, not enough supply.

If you then say that consumers aren't buying enough and there isn't enough
demand, then that could also be a problem (recession). But too much
consumption and not enough consumption can't both be problems at the same
time.

~~~
snogglethorpe
> _But too much consumption and not enough consumption can 't both be problems
> at the same time._

What if the the problem is that the demand is for things that Japanese
companies have a hard time producing? E.g., oil/energy (which of course
actually is a big problem in Japan), iphones, etc...

------
benmmurphy
I find it a bit unbelievable that the bank of Japan wants inflation but has
been unable to produce it. A simpler explanation is the bank of Japan does not
want inflation because it is not politically possible. I also noticed he
mentioned that economic textbooks say an aging economy should produce
inflation so Japan is confusing. But what do political economy textbooks say
about the monetary policy demands of an aging population? I can't see an
inflationary monetary policy going down too well politically with older people
who have savings in fixed interest. Japan has had low monetary growth because
that is what is politically popular.

~~~
chrisgd
Woukdnt most of their savings benefit from inflation as the interest they
earned would increase

~~~
benmmurphy
I think a lot have fixed rate long term bonds that would hurt if inflation
increased. 95 % of Japanese bonds are owned domestically
([http://m.nber.org//papers/w18287](http://m.nber.org//papers/w18287)).
Japanese people with wealth (ie old people) would have large direct or
indirect exposure to government bonds which are mostly fixed interest.

------
danmaz74
Does anybody have ideas about how a small foreign investor could borrow money
in yen? I've got a mortgage too, and it is denominated in the too-strong-for-
our-good Euro :)

~~~
rfugger
Get a forex margin account and buy EUR against the Yen?

~~~
danmaz74
Thanks for the suggestion. Someday I could really try :)

------
elchief
Did Maudlin correctly predict the housing bubble and collapse? Otherwise, his
opinion is worth nothing.

~~~
rsheridan6
This is sort of off-topic, but it would be nice if there was a convenient way
to know if a pundit is a complete buffoon - like a score based on how many
correct or incorrect predictions he's made. Points off for saying Iraq would
be a cakewalk and had nuclear weapons, and that houses in Las Vegas were a
good investment in 2005. You could save a few minutes of your life and a few
neurons by skipping articles by people who make those kinds of predictions.

I have no idea who Mauldin is, or whether he can be expected to give a
balanced view of an issue I don't know much about.

~~~
bjterry
PunditTracker is a pretty cool site that is trying to solve this problem:
[http://www.pundittracker.com/](http://www.pundittracker.com/)

------
newobj
So practically speaking, how would a normal person go about trying to
capitalize on this analysis?

~~~
rfugger
Currency trading.

------
math
excellent commentary on situation in Japan by (very successful) hedge fund
manager Kyle Bass:
[http://www.youtube.com/watch?v=ZY6IEpKRA7Y](http://www.youtube.com/watch?v=ZY6IEpKRA7Y)

------
lnanek2
If anyone can make more with less workers, it's Japan. Bring on the robots!

