Japan, 1989

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bpp
Posts: 2017
Joined: Mon Feb 26, 2007 12:35 pm
Location: Japan

Re: Japan, 1989

Post by bpp » Sun Feb 23, 2014 11:10 pm

An update through the end of 2013.

Yearly portfolio values for 1 million yen invested at the end of 1989, in both nominal and inflation-adjusted (using Japanese CPI) yen terms. No withdrawals, yearly re-balancing.

100% Japanese stocks:

Code: Select all

Year	Year-End Bal.	Infl.-adj. Bal.
		
1989	1000000	1000000
1990	605600	584129
1991	603238	566493
1992	464373	431270
1993	515314	473352
1994	562260	513416
1995	574011	526224
1996	539226	491413
1997	434562	388752
1998	406011	361116
1999	648359	582830
2000	486529	439063
2001	394526	360610
2002	325484	298387
2003	407474	375038
2004	453681	416738
2005	658881	607642
2006	678779	624126
2007	603367	550952
2008	358279	325869
2009	385580	356662
2010	389282	361532
2011	323104	300675
2012	390503	363762
2013	602976	552778
60/40 Jp stocks/Jp bonds

Code: Select all

Year	Year-End Bal.	Infl.-adj. Bal.
		
1989	1000000	1000000
1990	788612	760653
1991	809129	759842
1992	713454	662595
1993	770268	707545
1994	817026	746050
1995	835324	765783
1996	806713	735181
1997	714034	638764
1998	687455	611438
1999	935219	840698
2000	795898	718249
2001	707018	646237
2002	632920	580229
2003	728617	670618
2004	778248	714875
2005	989477	912529
2006	1007762	926621
2007	943173	861239
2008	715570	650838
2009	749168	692980
2010	753875	700135
2011	677405	630382
2012	762512	710296
2013	1011750	927521
30/30/40 Jp Stocks/For Stocks/Jp Bonds

Code: Select all

Year	Year-End Bal.	Infl.-adj. Bal.
		
1989	1000000	1000000
1990	878758	847603
1991	943877	886382
1992	903605	839192
1993	977287	897706
1994	978835	893803
1995	1084981	994655
1996	1185378	1080271
1997	1251990	1120011
1998	1261493	1122001
1999	1530574	1375881
2000	1410791	1273153
2001	1324840	1210946
2002	1146311	1050880
2003	1306976	1202938
2004	1396370	1282664
2005	1693058	1561395
2006	1834640	1686921
2007	1819619	1661547
2008	1306625	1188425
2009	1501656	1389031
2010	1506329	1398950
2011	1380945	1285084
2012	1593991	1484836
2013	2098027	1923365
30/30/20/20 Jp Stocks/For Stocks/Jp Bonds/For Bonds

Code: Select all

Year	Year-End Bal.	Infl.-adj. Bal.
		
1989	1000000	1000000
1990	868782	837980
1991	918928	862953
1992	877491	814939
1993	930338	854581
1994	915056	835564
1995	1030267	944496
1996	1161877	1058853
1997	1268909	1135145
1998	1257086	1118081
1999	1508789	1356298
2000	1446827	1305673
2001	1416467	1294695
2002	1204071	1103832
2003	1352645	1244972
2004	1438419	1321288
2005	1794399	1654855
2006	1963802	1805683
2007	1941415	1772763
2008	1325940	1205992
2009	1529607	1414886
2010	1499725	1392817
2011	1360065	1265654
2012	1599730	1490182
2013	2177897	1996585
All the above on one graph:
Image

Sources:

Japanese 1-year JGBs (use Jan 4 rates): http://www.economagic.com/em-cgi/data.e ... -intrate01
World-ex-Japan stocks: http://www.msci.com/products/indices/pe ... ?undefined
--Choose “Market=All Country (DM+EM), Currency=USD, Index Level=Gross, Size=Standard (Large+Mid Cap), As of=Dec 31, YYYY”
--Then select "ACWI ex Japan" 1 Yr return from table. This gives return in USD -- then convert to yen.
Exchange rates: http://www.oanda.com/
Japanese CPI: http://www.e-stat.go.jp/SG1/estat/Csvdl ... 0011288577
TOPIX (dividends included): http://www.tse.or.jp/market/topix/data/report.html
US 1-year Treasuries (Use Jan 2 rates): http://www.treasury.gov/resource-center ... &year=2013

(Note: Foreign Bonds = US 1-year Treasuries)

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Black Swan
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Re: Japan, 1989

Post by Black Swan » Mon Feb 24, 2014 5:02 am

bpp, does that calculation include dividends reinvested?

bpp
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Location: Japan

Re: Japan, 1989

Post by bpp » Mon Feb 24, 2014 6:08 am

Black Swan wrote:bpp, does that calculation include dividends reinvested?
Yes.

longinvest
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Re: Japan, 1989

Post by longinvest » Fri Feb 28, 2014 5:25 pm

bpp,

Do you have data going back before 1989? What is your data source?

I would be interested to add this data into the VPW spreadsheet for back-testing.

Thanks
Bogleheads investment philosophy | One-ETF global balanced index portfolio | VPW

bpp
Posts: 2017
Joined: Mon Feb 26, 2007 12:35 pm
Location: Japan

Re: Japan, 1989

Post by bpp » Fri Feb 28, 2014 8:34 pm

longinvest wrote:bpp,

Do you have data going back before 1989? What is your data source?

I would be interested to add this data into the VPW spreadsheet for back-testing.

Thanks
My sources are listed here:
Sources:

Japanese 1-year JGBs (use Jan 4 rates): http://www.economagic.com/em-cgi/data.e ... -intrate01
World-ex-Japan stocks: http://www.msci.com/products/indices/pe ... ?undefined
--Choose “Market=All Country (DM+EM), Currency=USD, Index Level=Gross, Size=Standard (Large+Mid Cap), As of=Dec 31, YYYY”
--Then select "ACWI ex Japan" 1 Yr return from table. This gives return in USD -- then convert to yen.
Exchange rates: http://www.oanda.com/
Japanese CPI: http://www.e-stat.go.jp/SG1/estat/Csvdl ... 0011288577
TOPIX (dividends included): http://www.tse.or.jp/market/topix/data/report.html
US 1-year Treasuries (Use Jan 2 rates): http://www.treasury.gov/resource-center ... &year=2013
(Note: Foreign Bonds = US 1-year Treasuries)
Most of the sources go back to the early 1970s at least. (Japanese CPI to 1970, Japanese 1-year bonds to 1974.)

The TOPIX returns come from the Tokyo Stock Exchange. Unfortunately, those returns do not go back before 1989.
An alternative might be to use the MSCI website, using Gross returns. Their Japan series goes back to Dec. 31, 1969.

HopeToGolf
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Re: Japan, 1989

Post by HopeToGolf » Sun Mar 02, 2014 12:30 pm

Bpp

Thank you for posting this. While I do not know enough about the U.S. economy past, present and future compared to that of Japan, this type of post is helpful for me to keep in mind anytime I think about my international equity allocation versus being 100% U.S.

In other words, diversification would have helped the Japanese investor and it helps all investors.

longinvest
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Re: Japan, 1989

Post by longinvest » Sun Mar 02, 2014 7:17 pm

bpp wrote: My sources are listed here:
[...]
Most of the sources go back to the early 1970s at least. (Japanese CPI to 1970, Japanese 1-year bonds to 1974.)

The TOPIX returns come from the Tokyo Stock Exchange. Unfortunately, those returns do not go back before 1989.
An alternative might be to use the MSCI website, using Gross returns. Their Japan series goes back to Dec. 31, 1969.
bpp, this is very helpful. I should be able to find enough data for the VPW spreadsheet (I might not be able to use MSCI's data, though, because of restrictions). It will take me some time to go through it all.

Thanks a lot!
Bogleheads investment philosophy | One-ETF global balanced index portfolio | VPW

longinvest
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Re: Japan, 1989

Post by longinvest » Sun Jun 29, 2014 1:48 pm

Bpp,

Going through your sources has proved above my abilities. On the other hand, I was able to reconstruct data from your post (http://www.bogleheads.org/forum/viewtop ... 3#p1971254) to add Japan simulations into my personal working copy of the VPW spreadsheet. See http://www.bogleheads.org/forum/viewtop ... 0#p2105754 for a screenshot.

Do you give me permission to include the data from your message (http://www.bogleheads.org/forum/viewtop ... 3#p1971254) and publish it as part of the VPW spreadsheet?

Regards,

longinvest
Bogleheads investment philosophy | One-ETF global balanced index portfolio | VPW

bpp
Posts: 2017
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Location: Japan

Re: Japan, 1989

Post by bpp » Sun Jun 29, 2014 6:01 pm

longinvest wrote:Bpp,

Going through your sources has proved above my abilities. On the other hand, I was able to reconstruct data from your post (http://www.bogleheads.org/forum/viewtop ... 3#p1971254) to add Japan simulations into my personal working copy of the VPW spreadsheet. See http://www.bogleheads.org/forum/viewtop ... 0#p2105754 for a screenshot.

Do you give me permission to include the data from your message (http://www.bogleheads.org/forum/viewtop ... 3#p1971254) and publish it as part of the VPW spreadsheet?

Regards,

longinvest
Hi longinvest,

Most of it I think is ok. The part I would worry about is that based on MSCI (world ex-Japan) data, which has an explicit restriction on reproduction. Presumably, what you have managed to back out of the numbers is my version of the MSCI returns, which I had converted into yen terms? The original MSCI data were in US dollar terms, so you would still not quite be back to what they published... But I'm not sure if that is enough of a fig leaf to satisfy them.

The TOPIX data are copyright the Tokyo Stock Exchange, which should probably be noted somewhere.

(Hmm, come to think of it, now that I have figured out how to put up graphs here, it may be safer for me to omit the actual numbers from future updates, and just leave pointers to the sources...)

longinvest
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Re: Japan, 1989

Post by longinvest » Sun Jun 29, 2014 6:19 pm

bpp wrote: Hi longinvest,

Most of it I think is ok. The part I would worry about is that based on MSCI (world ex-Japan) data, which has an explicit restriction on reproduction. Presumably, what you have managed to back out of the numbers is my version of the MSCI returns, which I had converted into yen terms? The original MSCI data were in US dollar terms, so you would still not quite be back to what they published... But I'm not sure if that is enough of a fig leaf to satisfy them.

The TOPIX data are copyright the Tokyo Stock Exchange, which should probably be noted somewhere.

(Hmm, come to think of it, now that I have figured out how to put up graphs here, it may be safer for me to omit the actual numbers from future updates, and just leave pointers to the sources...)
Bpp,

Thanks for the quick reply. I would have no trouble acknowleding copyrights, as long as it is sufficient. If we don't have the right to use the data (or publish it), then I can't use it. :(

Anyway, thanks. I was able, at least, to get a rough idea of how VPW behaves on Japan data.

Cheers.
Bogleheads investment philosophy | One-ETF global balanced index portfolio | VPW

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Redstorm
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Re: Japan, 1989

Post by Redstorm » Fri Oct 10, 2014 7:27 pm

Re: Japan

Japan is shrinking at a record pace. The country lost 244,000 people in 2013 as births plunged and deaths soared. It faces the prospect of losing a third of its population in the next 50 years, raising fears about its economic prospects and labour market.

Image

Clive
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Re: Japan, 1989

Post by Clive » Sat Oct 11, 2014 3:42 am

Pulling the data as below together to form a yearly rebalanced equal weighted blend of Japanese stocks, US Stocks, 5 year Japanese Treasury Ladder (not marked to market, but simply the rolling average of five 5-year-yields), and I'm seeing a similar chart pattern to bpp's 30/30/40 Japanese stocks, foreign stock, Japanese Bonds 30/30/40 (yellow) chart line

Image

3.1% annualised real 1990 - 2013 inclusive

http://www.mof.go.jp/english/jgbs/refer ... /index.htm
Yearly Japanese 5 year Treasury yields %

Code: Select all

05/01/1981	8.779
04/01/1982	7.957
04/01/1983	7.597
04/01/1984	7.169
04/01/1985	6.426
04/01/1986	5.936
05/01/1987	4.633
04/01/1988	4.264
04/01/1989	4.001
04/01/1990	5.925
04/01/1991	6.74
06/01/1992	5.548
04/01/1993	4.239
04/01/1994	2.345
04/01/1995	4.176
04/01/1996	2.222
06/01/1997	1.858
05/01/1998	1.261
04/01/1999	1.498
04/01/2000	1.013
04/01/2001	0.96
04/01/2002	0.548
06/01/2003	0.303
05/01/2004	0.624
04/01/2005	0.578
04/01/2006	0.827
04/01/2007	1.288
04/01/2008	0.973
05/01/2009	0.678
04/01/2010	0.495
04/01/2011	0.426
04/01/2012	0.35
04/01/2013	0.203
06/01/2014	0.229
Japanese 5 year Treasury ladder (not marked to market, just the average of the current and past four 5-year-yields)

Code: Select all

1990	4.95
1991	5.11
1992	5.30
1993	5.29
1994	4.96
1995	4.61
1996	3.71
1997	2.97
1998	2.37
1999	2.20
2000	1.57
2001	1.32
2002	1.06
2003	0.86
2004	0.69
2005	0.60
2006	0.58
2007	0.72
2008	0.86
2009	0.87
2010	0.85
2011	0.77
2012	0.58
2013	0.43
2014	0.34
Japan year end inflation %

Code: Select all

1990	3.8
1991	2.7
1992	1.2
1993	1
1994	0.7
1995	-0.3
1996	0.6
1997	1.8
1998	0.6
1999	-1.1
2000	-0.2
2001	-1.2
2002	-0.3
2003	-0.4
2004	0.2
2005	-0.4
2006	0.3
2007	0.7
2008	0.4
2009	-1.7
2010	-0.5
2011	0
2012	-0.1
2013	1.6
Yen/US$ January

Code: Select all

1989	127.2
1990	145.1
1991	133.7
1992	125.1
1993	125.0
1994	111.5
1995	99.8
1996	105.8
1997	118.2
1998	129.5
1999	113.1
2000	105.2
2001	117.1
2002	132.7
2003	118.7
2004	106.4
2005	103.3
2006	115.3
2007	120.6
2008	107.6
2009	90.4
2010	91.3
2011	82.6
2012	76.9
2013	85.96
2014	104.93
US Total Stock Market total gain % (US $)

Code: Select all

1990	-6
1991	34.7
1992	9.8
1993	10.62
1994	-0.17
1995	35.79
1996	20.96
1997	30.99
1998	23.26
1999	23.81
2000	-10.57
2001	-10.97
2002	-20.96
2003	31.35
2004	12.52
2005	5.98
2006	15.51
2007	5.49
2008	-37.04
2009	28.7
2010	17.09
2011	0.96
2012	16.25
2013	33.35
Japan Stock Market total gain % (Yen)

Code: Select all

1990	-39.44
1991	-0.39
1992	-23.02
1993	10.97
1994	9.11
1995	2.09
1996	-6.06
1997	-19.41
1998	-6.57
1999	59.69
2000	-24.96
2001	-18.91
2002	-17.50
2003	25.19
2004	11.34
2005	45.23
2006	3.02
2007	-11.11
2008	-40.62
2009	7.62
2010	0.96
2011	-17.00
2012	20.86
2013	54.41
[/size]

z3r0c00l
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Re: Japan, 1989

Post by z3r0c00l » Sat Oct 11, 2014 7:26 am

Starting in 1989 is misleading because that is the peak of an almost unprecedented asset bubble. A person who had 250,000 in 1982 may have had 1,000,000 in 1989. Then they saw it drop to only 500,000 after the prolonged bear market. How many people put all their money in to the market in 1989 alone?

Clive
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Re: Japan, 1989

Post by Clive » Sat Oct 11, 2014 7:58 pm

Starting in 1989 is misleading because that is the peak of an almost unprecedented asset bubble
Japan 1972 to 2013 inclusive, for a Japanese investor holding a third each (yearly rebalanced) J-Stocks, US TSM, J-5-year-treasury-ladder (not marked to market, but just the five year rolling average of 5 year yields)

Image

The 1970's drawdown was due to relatively high Japanese inflation (as was also apparent in UK, US etc (global)), respectively for years 1973 - 1976

18.30%
21.00%
7.80%
10.50%

117% nominal stock gain in 1972, followed by those high inflation years, saw a initial 1 Yen at the start of 1972 rise to 1.4 in real terms by the end of 1972 for the 3-fund, but then later years saw that drop to 0.7 Yen by year end 1974 in real terms (50% drawdown from prior 1972 year end high).

4.3% annualised real for 1972 - 2013 inclusive (3.1% annualised real since 1990, 2.4% annualised real since 2000)

columbia
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Re: Japan, 1989

Post by columbia » Sat Oct 11, 2014 10:45 pm

Does anyone think that holding 30% international will save their biscuits, if this were to happen in the US?
If you leave your head in the sand for too long, you might get run over by a Jeep.

Clive
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Re: Japan, 1989

Post by Clive » Sun Oct 12, 2014 3:28 am

Does anyone think that holding 30% international will save their biscuits, if this were to happen in the US?
Look at a period when a 'contraction' has happened in the past. 1970 to 1980 and through to 1990 Japan's economy expanded resulting in the US share of the world market relatively contracting (in percentage terms).

Image

Comparing 3-fund (33% international, 33% US, 33% 2 year treasury) against 100% TSM for the 1972 to 1981 decade (Simba's backtest spreadsheet), +0.54% real versus -1.61% real respective annualised figures are apparent. Spending some of the total gains (4%) each year and the respective drawdowns were something like -50% compared to -30%, so it would appear that 30% international could have saved some biscuits (40% more biscuits based on 70 / 50 = 1.4).

magneto
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Re: Japan, 1989

Post by magneto » Sun Oct 12, 2014 4:12 am

From 'Devil take the Hindmost' Chancellor.
By 1990, the total (Japanese) property market was valued at four times the real estate of the entire United States.
The grounds of the Imperial Palace in Tokyo were estimated to be worth more than the entire real estate value of California (or Canada if you preferred).
Japanese stock PE was at 80.

Japan was different, right?
Valuations should be ignored, right?
Only Tobins Q could faintly justify stock valuations by being based on ridiculously high land prices.

My takeaway, the seeds of Japan's underperformance is simply a reflection of the collapse from the preceding bubble, and the economic consequences.

PE in Japan last week was 20.36.

IMO Valuations are important, and investors who assume markets are macro-efficient and always priced correctly, then hold a fixed stock%, tread a dangerous course. Holding a fixed stock % has worked well for many years in US, but think how rebalancing into a black hole would have worked in 1929 et al.

The Japanese investor who took note of valuations could have moved most of his stocks outside of Japan, but it was so tempting to ride the Japanese train ever upwards.
'There is a tide in the affairs of men ...', Brutus (Market Timer)

mkikeda
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Re: Japan, 1989

Post by mkikeda » Sun Oct 12, 2014 5:16 am

A feature of the Japanese stock market of 1989 that differed markedly from the US today was corporate cross holdings. Specifically, 79% of Japanese shares were held by other Japanese companies. (Note: not institutional investors, but companies with actual business operations.) This massively overstated Japan's reported market capitalization, with numerous implications for index investing strategies. Consider an economy with two companies, A and B. Viewed in isolation, the value of A is the innocuous equation: ValueA = OwnAssetsA +.79 * ValueB.

But ValueB = OwnAssetB + .79 * ValueA. In advanced accounting classes, CPAs are taught to handle these crossholding structures by solving simultaneous equations. For simplicity, assume the two companies' underlying operations are of the same size. Then, stated market cap (ValueA + Value B) will be 3.448 times the value of the same two-company economy with no cross holdings (OwnAssetsA + OwnAssetsB). Another way to think about this was that 79% of the shares that were reported as outstanding were actually treasury shares held by Japan Inc, and therefore not outstanding from the perspective of the investing public and should not have been included in computations of the stock market's value.

Kenneth French (of Fama and French fame) and James Poterba tried to adjust for this in their 1991 paper that attempted to explain why Japanese PE ratios were so high during that era (Journal of Financial Economics). About 15 years ago, MSCI implemented a broad rebalancing of its international indices to adjust for such free-float issues. But it's really not possible to back out the effects of such an all-pervasive and significant factor across thousands of companies. Also, note that Japanese companies have dramatically reduced their crossholdings over the last 20 years, with complex negative effects on broad market averages.

Japan's economic malaise since the early 1990s was certainly real and serious. But I don't believe that American buy-and-hold index investors should use Japanese equities as a base case for how bad things could get. That's far too pessimistic. (Note: We owned a residence in Tokyo in those days, but could not sell it for anywhere close to the purported bubble prices. Illiquid markets are difficult to generalize about.)
Last edited by mkikeda on Sun Oct 12, 2014 11:08 am, edited 2 times in total.

Clive
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Re: Japan, 1989

Post by Clive » Sun Oct 12, 2014 5:48 am

IMO Valuations are important
If prices double and double again in the space of a decade !!! :

US 'Roaring 20's'
Image

Japan 1980's
Image

bpp
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Re: Japan, 1989

Post by bpp » Tue Feb 17, 2015 3:05 am

Update through the end of 2014. We now have 25 years of data.

Yearly portfolio values for 1 million yen invested at the end of 1989, in inflation-adjusted (using Japanese CPI) yen terms. No withdrawals, yearly re-balancing.

Image

Sources:

Japanese 1-year JGBs (use Jan 4 rates): http://www.economagic.com/em-cgi/data.e ... -intrate01
(A chunk of data is missing including all of 2014, so for Jan. 2014 just used average of April 2013 and Feb. 2015 values -- the nearest available dates)

World-ex-Japan stocks: http://www.msci.com/products/indices/pe ... ?undefined
--Choose “Market=All Country (DM+EM), Currency=USD, Index Level=Gross, Size=Standard (Large+Mid Cap), As of=Dec 31, YYYY”
--Then select "ACWI ex Japan" 1 Yr return from table. This gives return in USD -- then convert to yen.

Exchange rates: http://www.oanda.com/

Japanese CPI: http://www.e-stat.go.jp/SG1/estat/Csvdl ... 0011288577

TOPIX (dividends included): http://www.tse.or.jp/market/topix/data/report.html

US 1-year Treasuries (Use Jan 2 rates): http://www.treasury.gov/resource-center ... &year=2014

(Note: Foreign Bonds = US 1-year Treasuries)
Last edited by bpp on Tue Feb 17, 2015 9:15 am, edited 2 times in total.

tibbitts
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Re: Japan, 1989

Post by tibbitts » Tue Feb 17, 2015 8:48 am

Thanks for posting that. It seems from a lot of posts here that we may have now become too conditioned to one "crisis" after another where markets manage to recover within a few years, so this is helpful counterbalancing information. Certainly back in the 80s the Japanese economy and business models were highly regarded, although probably lots of people today don't remember that. All of the information that's known today was pretty much known then - except for the results, of course.

angelescrest
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Re:

Post by angelescrest » Tue Feb 17, 2015 8:48 am

Tramper Al wrote:
yobria wrote:Also, who in their right mind, living on a island half the size of Texas, fails to invest internationally?
Well, you have to try to put yourself into an unfamiliar home-bias situation, and try to think outside of our own U.S.-centric bias at the same time. I believe that at one point the market-cap weight of Japan exceeded that of the U.S., no? It just too easy to ridicule investment in the Japanese stock market - in retrospect. As for land mass, I don't believe I have seen that seriously proposed as a weighting scheme for international asset allocation.
Agreed, that's as biased of a statement as I've seen here.

Great post btw. The comparisons are interesting.

angelescrest
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Re:

Post by angelescrest » Tue Feb 17, 2015 9:31 am

Karamatsu wrote: The US has a political culture that demands action
[OT comments removed by admin LadyGeek]

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Re: Japan, 1989

Post by LadyGeek » Tue Feb 17, 2015 5:19 pm

As a reminder, political comments are off-topic.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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ginmqi
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Re: Japan, 1989

Post by ginmqi » Tue Feb 17, 2015 7:10 pm

This ties in nicely with the recent thread discussing John Bogle's aversion to investing in foreign stocks.

So if we are to try to hedge against the US becoming the next Japan...from the nice chart posted above...it seems the prudent lesson to take away here is: Split your equity 50/50 in US and foreign stocks, so if something similar happens to US you are still able to retire with dignity.

I'd also like to see, if possible, splits of allocation other than 50/50. Since popular view is to split US/foreign into 70/30.

bpp
Posts: 2017
Joined: Mon Feb 26, 2007 12:35 pm
Location: Japan

Re: Japan, 1989

Post by bpp » Tue Feb 17, 2015 9:58 pm

ginmqi wrote:This ties in nicely with the recent thread discussing John Bogle's aversion to investing in foreign stocks.

So if we are to try to hedge against the US becoming the next Japan...from the nice chart posted above...it seems the prudent lesson to take away here is: Split your equity 50/50 in US and foreign stocks, so if something similar happens to US you are still able to retire with dignity.

I'd also like to see, if possible, splits of allocation other than 50/50. Since popular view is to split US/foreign into 70/30.
I guess the "classic boglehead" portfolio might be 70/30 or 80/20 domestic stocks/foreign stocks, with all domestic bonds.

At the risk of making the graph too busy, I have added a line (the middle, black one) for 75/25 Japan/foreign stocks, 60/40 stocks/bonds, where bonds are 100% domestic:
Image

As one could expect, it lies between the 100% Japanese stock portfolio (red line), and the 50/50 Japanese/foreign stock portfolio (yellow line), where both are 60/40 stocks/domestic bonds. One can mentally shift it up or down a bit to imagine what a 70/30 or 80/20 domestic/foreign stock split would look like.

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ginmqi
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Re: Japan, 1989

Post by ginmqi » Tue Feb 17, 2015 10:20 pm

bpp wrote:
ginmqi wrote:This ties in nicely with the recent thread discussing John Bogle's aversion to investing in foreign stocks.

So if we are to try to hedge against the US becoming the next Japan...from the nice chart posted above...it seems the prudent lesson to take away here is: Split your equity 50/50 in US and foreign stocks, so if something similar happens to US you are still able to retire with dignity.

I'd also like to see, if possible, splits of allocation other than 50/50. Since popular view is to split US/foreign into 70/30.
I guess the "classic boglehead" portfolio might be 70/30 or 80/20 domestic stocks/foreign stocks, with all domestic bonds.

At the risk of making the graph too busy, I have added a line (the middle, black one) for 75/25 Japan/foreign stocks, 60/40 stocks/bonds, where bonds are 100% domestic:
Image

As one could expect, it lies between the 100% Japanese stock portfolio (red line), and the 50/50 Japanese/foreign stock portfolio (yellow line), where both are 60/40 stocks/domestic bonds. One can mentally shift it up or down a bit to imagine what a 70/30 or 80/20 domestic/foreign stock split would look like.
Thanks alot for your work! More like a dark magenta to me though...anyway, that also seems useless....because at the 2012 mark (before the anomaly bull years of 2013/2014, we are basically right back at 1mil in 2012...a whopping 23 years after invested....and there is literally 0% real growth (inflation adjusted).

But as I just posted in the other Bogle thread, the popular 70/30 figure seem to come from a 2012 Vanguard white paper that showed something like this:
Image
In light of quantitative analysis and qualitative considerations, we have demonstrated that
domestic investors should consider allocating part of their portfolios to international securities,
and that a 20% allocation may be a reasonable starting point.

Although finance theory dictates that an upper asset allocation limit should be based on the global market capitalization for international
equities (currently approximately 58%), we have demonstrated that international allocations exceeding
40% have not historically added significant additional diversification benefits, particularly accounting for
costs.

For many investors, an allocation between 20% and 40% should be considered reasonable,
given the historical benefits of diversification.

Allocations closer to 40% may be suitable for those investors seeking to be closer to a market proportional
weighting or for those who are hoping to obtain potentially greater diversification benefits
and are less concerned with the potential risks and higher costs. On the other hand, allocations closer
to 20% may be viewed as offering a greater balance among the benefits of diversification, the risks of
currency volatility and higher U.S. to non-U.S. stock correlations, investor preferences, and costs.
https://personal.vanguard.com/pdf/icriecr.pdf

bpp
Posts: 2017
Joined: Mon Feb 26, 2007 12:35 pm
Location: Japan

Re: Japan, 1989

Post by bpp » Wed Feb 18, 2015 3:03 am

ginmqi wrote:More like a dark magenta to me though...
Hmm, on closer inspection... you're right!

sunflash
Posts: 22
Joined: Sun Oct 25, 2015 7:17 am

Re: Japan, 1989

Post by sunflash » Sun Oct 25, 2015 7:20 am

bpp wrote:An update through the end of 2013.

Yearly portfolio values for 1 million yen invested at the end of 1989, in both nominal and inflation-adjusted (using Japanese CPI) yen terms. No withdrawals, yearly re-balancing.

100% Japanese stocks:

Code: Select all

Year	Year-End Bal.	Infl.-adj. Bal.
		
1989	1000000	1000000
1990	605600	584129
1991	603238	566493
1992	464373	431270
1993	515314	473352
1994	562260	513416
1995	574011	526224
1996	539226	491413
1997	434562	388752
1998	406011	361116
1999	648359	582830
2000	486529	439063
2001	394526	360610
2002	325484	298387
2003	407474	375038
2004	453681	416738
2005	658881	607642
2006	678779	624126
2007	603367	550952
2008	358279	325869
2009	385580	356662
2010	389282	361532
2011	323104	300675
2012	390503	363762
2013	602976	552778
60/40 Jp stocks/Jp bonds

Code: Select all

Year	Year-End Bal.	Infl.-adj. Bal.
		
1989	1000000	1000000
1990	788612	760653
1991	809129	759842
1992	713454	662595
1993	770268	707545
1994	817026	746050
1995	835324	765783
1996	806713	735181
1997	714034	638764
1998	687455	611438
1999	935219	840698
2000	795898	718249
2001	707018	646237
2002	632920	580229
2003	728617	670618
2004	778248	714875
2005	989477	912529
2006	1007762	926621
2007	943173	861239
2008	715570	650838
2009	749168	692980
2010	753875	700135
2011	677405	630382
2012	762512	710296
2013	1011750	927521
30/30/40 Jp Stocks/For Stocks/Jp Bonds

Code: Select all

Year	Year-End Bal.	Infl.-adj. Bal.
		
1989	1000000	1000000
1990	878758	847603
1991	943877	886382
1992	903605	839192
1993	977287	897706
1994	978835	893803
1995	1084981	994655
1996	1185378	1080271
1997	1251990	1120011
1998	1261493	1122001
1999	1530574	1375881
2000	1410791	1273153
2001	1324840	1210946
2002	1146311	1050880
2003	1306976	1202938
2004	1396370	1282664
2005	1693058	1561395
2006	1834640	1686921
2007	1819619	1661547
2008	1306625	1188425
2009	1501656	1389031
2010	1506329	1398950
2011	1380945	1285084
2012	1593991	1484836
2013	2098027	1923365
30/30/20/20 Jp Stocks/For Stocks/Jp Bonds/For Bonds

Code: Select all

Year	Year-End Bal.	Infl.-adj. Bal.
		
1989	1000000	1000000
1990	868782	837980
1991	918928	862953
1992	877491	814939
1993	930338	854581
1994	915056	835564
1995	1030267	944496
1996	1161877	1058853
1997	1268909	1135145
1998	1257086	1118081
1999	1508789	1356298
2000	1446827	1305673
2001	1416467	1294695
2002	1204071	1103832
2003	1352645	1244972
2004	1438419	1321288
2005	1794399	1654855
2006	1963802	1805683
2007	1941415	1772763
2008	1325940	1205992
2009	1529607	1414886
2010	1499725	1392817
2011	1360065	1265654
2012	1599730	1490182
2013	2177897	1996585
All the above on one graph:
Image

Sources:

Japanese 1-year JGBs (use Jan 4 rates): http://www.economagic.com/em-cgi/data.e ... -intrate01
World-ex-Japan stocks: http://www.msci.com/products/indices/pe ... ?undefined
--Choose “Market=All Country (DM+EM), Currency=USD, Index Level=Gross, Size=Standard (Large+Mid Cap), As of=Dec 31, YYYY”
--Then select "ACWI ex Japan" 1 Yr return from table. This gives return in USD -- then convert to yen.
Exchange rates: http://www.oanda.com/
Japanese CPI: http://www.e-stat.go.jp/SG1/estat/Csvdl ... 0011288577
TOPIX (dividends included): http://www.tse.or.jp/market/topix/data/report.html
US 1-year Treasuries (Use Jan 2 rates): http://www.treasury.gov/resource-center ... &year=2013

(Note: Foreign Bonds = US 1-year Treasuries)
Hi,

Would it be possible for you to send me your excel sheet for this? PM for email contact.

Thanks

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