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Thread: Is US entering Japan's nightmare?

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    Veteran Member XxAmber89xX's Avatar
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    Default Is US entering Japan's nightmare?

    http://articles.moneycentral.msn.com...Nightmare.aspx

    Getting hit with this at the same time that the oldest Boomers are now beginning to retreat from investments and become evermore cost cutting leads to quite a lean economy. If we are heading for leanness, we got alot of fat to trim. Ouch!
    Oh Canada, we stand on cars and freeze...

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    Banned Melonie's Avatar
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    Default Re: Is US entering Japan's nightmare?

    ^^^ Canada could probably wind up as a modern day equivalent of Japan, because it could employ the same combination of low internal labor wage rates and high export profits. However, this is not realistic for the USA since we no longer produce much of anything that can be competitively exported no matter how far labor wage rates were pushed down. The one export commodity at which the USA excelled, i.e. food, is now being redirected by gov't mandate into domestic gas tanks instead of foreign grain silos.

    The other 'secret' that is escaping discussion is that the #1 reason for the US stock market boom of the 90's was the creation of 401k / IRA legislation ... which essentially forced working Americans to 'spend' thousands of dollars per year purchasing stocks instead of adding to bank account deposits, thus greatly stimulating demand for stock shares (and greatly stimulating higher stock prices). However, as the baby boomer generation begins to retire en mass, in order to fund their retirement expenses they are going to be similarly forced to sell those stock shares that are sitting in their 401k / IRA accounts. Lots of motivated sellers and few willing buyers will equal falling stock prices.

    This is of course opposed to Japanese workers who 'saved' a portion of their earnings in bank accounts rather than in the stock market !

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    Default Re: Is US entering Japan's nightmare?

    Quote Originally Posted by Melonie View Post
    The other 'secret' that is escaping discussion is that the #1 reason for the US stock market boom of the 90's was the creation of 401k / IRA legislation
    Stupid conclusion. Probably Elaine?

    Stocks 101: Stock Market is a Voting machine in the short-run (i.e Prices are driven by Supply Demand, like Gold), but a Weighing machine in the long run (i.e Prices are purely driven by Incomes/Profits of underlying companies).

    During the 90s, US companies profits increased more than 10% p.a which directly resulted in higher share prices.

    If Apple has no income, no amount of 401(k) pumping will drive up its stock price. Apple's Stock Price increases when it sells boatloads of iPods, iMac and iPhones

    If you can't understand this simple underlying concept of why Stock Prices go up, you shouldn't be investing in Stocks(Which I presume you aren't).

    But, the most ironic thing about all this is, the very logic you use to diss stocks is more applicable to Gold

    Have you or Elaine 'researched' US companies profits in the 90s or do you just don't let facts interrupt your pre-judiced economic theories?

    Profits are not a Zero Sum Game

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    God/dess Deogol's Avatar
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    Default Re: Is US entering Japan's nightmare?

    Quote Originally Posted by xanfiles1 View Post
    Stupid conclusion. Probably Elaine?

    Stocks 101: Stock Market is a Voting machine in the short-run (i.e Prices are driven by Supply Demand, like Gold), but a Weighing machine in the long run (i.e Prices are purely driven by Incomes/Profits of underlying companies).

    During the 90s, US companies profits increased more than 10% p.a which directly resulted in higher share prices.

    If Apple has no income, no amount of 401(k) pumping will drive up its stock price. Apple's Stock Price increases when it sells boatloads of iPods, iMac and iPhones

    If you can't understand this simple underlying concept of why Stock Prices go up, you shouldn't be investing in Stocks(Which I presume you aren't).

    But, the most ironic thing about all this is, the very logic you use to diss stocks is more applicable to Gold

    Have you or Elaine 'researched' US companies profits in the 90s or do you just don't let facts interrupt your pre-judiced economic theories?

    Profits are not a Zero Sum Game

    401Ks and stock based IRAs weren't designed to purchase the paper investment bankers were printing up?

    The same group that said "Oh hey, ya know - we can do the same thing with Social Security you know?!?! How about we do that too!"

    Your posts are so funny. They make me laugh real hard. HA ha ha ha!

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    Default Re: Is US entering Japan's nightmare?

    yeah i'm sick of trying to educate this guy

    I'm just gonna laugh at him from now on

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    Default Re: Is US entering Japan's nightmare?

    Quote Originally Posted by Deogol View Post
    401Ks and stock based IRAs weren't designed to purchase the paper investment bankers were printing up?

    The same group that said "Oh hey, ya know - we can do the same thing with Social Security you know?!?! How about we do that too!"

    Your posts are so funny. They make me laugh real hard. HA ha ha ha!
    Simple Question: What is the Value of a Stock?

    or even more general: What is the Value of an Asset?

    Another Question:

    If there is a guy on the corner of a street selling $100 Bills, How much do you think it would sell for? Assume the 401(k) managers have been instructed by the government to invest only in $100 Bills. What is the value of the $100 Bill after five years?

    If you can't get the basic underlying fundamentals right, all the other knowledge is useless and sometimes dangerous.

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    Banned Melonie's Avatar
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    Default Re: Is US entering Japan's nightmare?

    talk about hijacking a thread !

    If there is a guy on the corner of a street in Paris, London or Tokyo selling US $100 bills how much do you think it will sell for in Euros, Pounds or Yen ? How much different will the sale price be if there are 1 million guys trying to sell US $100 bills on foreign streetcorners ? The same point applies to a US dollar denominated stock, where total market demand consists of 40-50% foreign investor money. Your US centric economic view is showing again.

    At any rate, before that little side trip to the pre-global economy, my point was that there is a huge difference between Japan's internal economy and America's internal economy. The Japanese worker is a saver whereas the US worker is a borrower. The Japanese worker by and large does not invest in the Japanese stock market, whereas the US worker invests heavily in the US stock market (thanks to 401k / IRA legislation). The Japanese worker is not a frivolous spender, because costs of necessities have been persistently high since the 2000 Japanese crash ( 100% imported energy, housing, gov't barriers against low priced imports), whereas the US worker typically spends every dollar he can borrow (and much of it on low priced imports that are subject to exchange rate).

    Thus when Tokyo's big banks were forced to sell off stock shares of functionally bankrupt Japanese companies at the end of the 90's, this dumping did not directly affect your average Japanese worker. However, if and when America's big banks (a misnomer BTW since these big banks have increasingly large foreign ownership stakes) are forced to dump stock shares of functionally bankrupt American companies, this is going to hammer the 401k / IRA value of American workers' retirement funds. Similarly, as the oldest baby boomers will soon be forced to start selling off 401k / IRA shares because they need cash to finance their retirement, this will serve to create additional downward pricing pressure ... unless of course younger American workers step forward to buy those shares (doubtful ... too few younger American workers with too small paychecks) or foreign investors step forward to buy those shares ( doubtful ... too wary of double whammy loss of both stock share price in US dollars and exchange rate loss on those US dollars).

    And speaking of double whammys, as older baby boomers sell off their retirement fund stocks to foreign investors, it will tend to drive the dollar down even further. This in turn will cause the US dollar denominated price of imported oil / imported food / imported goods to increase. Which in turn will force the older baby boomers to sell off even MORE of their retirement fund stocks to foreign investors, potentially creating a vicious cycle to oblivion for the US dollar and US dollar denominated debt obligations ! You really don't need to look any further than the US housing market to see what happens when a large inventory of 'product' (i.e. houses or shares held in retirement funds) can no longer be 'held' but must be sold at whatever price the market is willing to pay !

    ~
    Last edited by Melonie; 02-05-2008 at 04:39 AM.

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    Default Re: Is US entering Japan's nightmare?

    Melonie- thanks for clarifying. Funny thing was this was the topic of the day in my 1st year economics class and you gave me some good points to bring up!

    I now dismiss the article as another fine example of oversensationalizing things. I hate being duped- especially in the financial pages!!!

    Cheers!
    Oh Canada, we stand on cars and freeze...

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