What do Bogleheads think of what happen to Japan?

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zetsui
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What do Bogleheads think of what happen to Japan?

Post by zetsui »

Their stock market peaked around '91 and has been that or less for the last 30 years.

How would Boglheads deal with a similar situation in the US? And what can we learn from JPN?

What [expletive removed by admin LadyGeek] did retirees in JPN end up doing?
stimulacra
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Re: What do Bogleheads think of what happen to Japan?

Post by stimulacra »

Teaches me to diversify outside my home country. I currently have 20% of assets in International, half of that in Emerging Markets. 5% in gold just in case.

No idea how the average retiree in Japan are doing. On the one hand it's a homogenous culture that venerates the elderly and keeps them integrated and involved in society. On the other hand there are periodic reports of lonely seniors renting "fake" adult children to visit them and of others committing non-violent crimes because incarceration is a better financial outcome than their current situation.

Why some Japanese pensioners want to go to jail
https://www.bbc.com/news/stories-47033704
Robot Monster
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Re: What do Bogleheads think of what happen to Japan?

Post by Robot Monster »

My game plan is 100% US allocation, and if that doesn't work out, then jail.
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Lynx310650
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Re: What do Bogleheads think of what happen to Japan?

Post by Lynx310650 »

I would love to know what percentage of people in Japan actually own stocks (or at least a meaningful amount as to where it would matter personally). My suspicion is it's quite low. Even in the USA it's only like 50% of the population owning stocks, right? I'd be shocked if it's anything close to that in Japan or was close to that back in the 90s. But I could be wrong.

So I'm assuming that retirees that were directly impacted by the stock market crash in Japan were quite small in number.

But I have always wondered how Japanese retirees get by considering their ultra low interest rates on fixed income or bank deposits. Maybe just a high level of savings? And I'm sure just like in other countries there are retirees that are struggling as well. I don't believe Japan has a very generous national pension plan or anything like that.
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Re: What do Bogleheads think of what happen to Japan?

Post by Robot Monster »

Lynx310650 wrote: Mon Sep 28, 2020 1:02 pm But I have always wondered how Japanese retirees get by considering their ultra low interest rates on fixed income or bank deposits.
Their interest rates are indeed ultra low, but so is their inflation, so the low rates aren't a big of a deal as they would seem on face value.
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Iridium
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Re: What do Bogleheads think of what happen to Japan?

Post by Iridium »

What do I think of Japan?

While they certainly have had problems, it is somewhat exaggerated. Their valuations ran up a crazy amount in a very short time. You were totally screwed on the money you invested at the top. However, money invested a year or two before the top got into the black a reasonable time after the pop. So, it would have been painful to have seen yourself blow past your number, only to have to wait decades to get back to the same place, but a hole wasn't necessarily blown in your your plan, as long as you were disciplined about maintaining your asset allocation.

Another thing to keep in mind is that in the presence of long term deflation, one needs less in order to retire. True market could be totally flat, but that is still a real win.

What can we learn?

I think one of the unappreciated lessons is how important it is to stick to plan when things get crazy. For folks who had a reasonably conservative return estimate and saved regularly with a consistent asset allocation, the whole bubble and pop would have been an easy come, easy go situation. Their bigger problem would have been the relative stagnation afterward, but they would have been in far better shape than the folks who FOMOed the peak or panic sold at the bottom.

Oddly enough, people seem to have taken the exact opposite lesson and seem to point to Japan as an excuse to panic sell.

How did retirees end up doing?

Not entirely certain. However, one thing to keep in mind is that equity investing is nowhere near as widespread there as it is here. Three average Japanese is going to have a much harder time due to the long term near zero interest rates than due to anything happening in the market. However, keep in mind the deflation. In the US, getting an after tax, after inflation, return of zero isn't all that bad. So, getting a nominal 0, paying no taxes on it (obviously) but getting to benefit from a bit of deflation isn't a horrible place to be.
Last edited by Iridium on Mon Sep 28, 2020 1:13 pm, edited 2 times in total.
Soon2BXProgrammer
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Re: What do Bogleheads think of what happen to Japan?

Post by Soon2BXProgrammer »

This is why I invest in equities at world market cap.
Lynx310650
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Re: What do Bogleheads think of what happen to Japan?

Post by Lynx310650 »

Robot Monster wrote: Mon Sep 28, 2020 1:07 pm
Lynx310650 wrote: Mon Sep 28, 2020 1:02 pm But I have always wondered how Japanese retirees get by considering their ultra low interest rates on fixed income or bank deposits.
Their interest rates are indeed ultra low, but so is their inflation, so the low rates aren't a big of a deal as they would seem on face value.
Good point, I forgot about how low inflation has been in Japan for almost a generation.

I guess then the stereotypical cash under the mattress approach wouldn't even be that bad for Japanese retirees.
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Re: What do Bogleheads think of what happen to Japan?

Post by wolf359 »

zetsui wrote: Mon Sep 28, 2020 12:34 pm Their stock market peaked around '91 and has been that or less for the last 30 years.

How would Boglheads deal with a similar situation in the US? And what can we learn from JPN?

What [expletive removed by admin LadyGeek] did retirees in JPN end up doing?
Think about what that means. 30 years ago, the Japanese stock market peaked. If you were a Japanese Boglehead starting in 1991, the market was at its peak, but you had nothing invested. You were then investing regularly for the next 30 years, up to present day. How do you think your portfolio would look?

Spoiler alert: it depends on your asset allocation. Remember, you don't have a lifetime of savings in 1991 and hold for 30 years. You start with 0 and invest over time, buying more as the market dropped. If you have bonds or US stocks in your asset allocation, your annual rebalance increases your return. It isn't a total disaster. Actually, even investing 100% in the Japanese market isn't a disaster. The peak is a one-time event. The long sideways movement since then still allows a reasonable return. Sure, it's not US market return, but it's still a significant accumulation.

Diversifying into bonds and into international (for Japan that includes a hefty slug of the US market), and you'd be okay.

If you want to run some numbers yourself, go to portfoliovisualizer.com. Use EWJ as a proxy for the Japanese stock market. (I think that only goes back to 1999.) Then play with different assumptions. I also used CASHX as a cash proxy (I don't have the ticker for a Japanese bond or treasury equivalent, and cash is like sticking your money in a mattress or bank account.)

Someone who retired in Japan in 1991 at the peak of the market would be in trouble if they had 100% of their stocks in Japan. But if they split it to 1/3 each of Japanese stocks, Bonds/cash, and S&P 500, they'd probably have been okay as well. Remember, few people buy their entire portfolio at the peak of the market. They accumulate over many years, then withdraw over many years. When that is taken into account, and if combined with diversification strategies, disaster can be avoided. The market peak was achieved in a relatively short period of time. The funds invested over a career probably took longer. Someone who achieved their FI number in 1991 on the market alone would probably have to keep working longer.
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Re: What do Bogleheads think of what happen to Japan?

Post by dru808 »

Japanese investors with a sizable ex japan holdings were fine.
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Re: What do Bogleheads think of what happen to Japan?

Post by Robot Monster »

A shout-out to any Japanese who lump-summed in December 1989, and their -37.487% return (as of January.) You can calculate historic returns here:

Nikkei Return Calculator
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Dennisl
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Re: What do Bogleheads think of what happen to Japan?

Post by Dennisl »

My understanding is that PE ratio was much higher than what we have in the US. However, I think it's possible that we'll have low returns and possible deflation vs inflation for an extended period of time. I think it's important to diversify with US and international. Can also hedge with I bonds/TIPS for inflation and EE bonds for deflation. I have a long time horizon, so even if Japan happens, I could probably ride it out as long as I stay the course. Regardless of who wins the election, I think the fed has gotten pretty good at keeping us afloat. My bigger concern is how are we going to tackle our national debt and what are taxes and SS going to look like in the future. A lot of unknowns. May have to change the course at some point if the information that comes in makes it apparent that a certain approach may not work, such as some people feel about bonds at this time.
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JoMoney
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Re: What do Bogleheads think of what happen to Japan?

Post by JoMoney »

Interestingly, Japan's stock market has done better than other ex-US world stocks for the past 13 or so years...

If US stocks don't perform well enough (perish the thought), my guess is I'll be doing what the majority of Americans (who don't own stocks) are doing to eat...
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Re: What do Bogleheads think of what happen to Japan?

Post by asif408 »

Two big takeaways to me:

1) Valuations matter; high valuations tend to mean lower future returns. If valuations are high enough, that can mean negative or zero returns for decades, so best not to own a lot of countries with very high valuations.

2) High valuations can last for many years or continue going higher. So if you use a valuation based investing approach, you have to be patient and willing to miss out on some big gains and deal with FOMO. Japan had high valuations in the early 1980s compared to almost every other country, yet went to extreme valuations by 1990 and was pretty much the best performing country of the 1980s, after being one of the best performing countries of the 1970s. Wonder how many investors here would have had a Japan overweight if the past 2 decades of stock market performance was like the 1970s & 1980s?
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Re: What do Bogleheads think of what happen to Japan?

Post by BogleFan510 »

I lived there when it happened.

An additional take away is that a rational valuation, based on expected outcome, doesnt always materialize. Japanese companies actually had huge growth potential (that I saw up close as an insider). A crisis of confidence led to under achievement. This happens.

People need to understand that inside equities are humans who need to deliver.

If you bet on the Clippers to win an NBA title this year, you had a similar result. Favorites dont always win.
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Re: What do Bogleheads think of what happen to Japan?

Post by alex_686 »

Lynx310650 wrote: Mon Sep 28, 2020 1:02 pm I would love to know what percentage of people in Japan actually own stocks (or at least a meaningful amount as to where it would matter personally). My suspicion is it's quite low. Even in the USA it's only like 50% of the population owning stocks, right? I'd be shocked if it's anything close to that in Japan or was close to that back in the 90s. But I could be wrong.
30 years ago the majority of stock was owned by strategic partners, subsidiaries, or the banks that had lent companies in the first place. There were some great flow diagrams back in the day showing the incestuous relationships.
Dennisl wrote: Mon Sep 28, 2020 2:48 pm My understanding is that PE ratio was much higher than what we have in the US.
Partly this was interest rates were low before the bubble popped. 100 year mortgages with forced assumption by your children were common. Low interest rates means higher P/E ratios.

Partly this was back to the incestuous relationships. It was not a well functioning market. It was not centered on independent agents involved in price discovery. You bought shares in a company to cement a relationship and for control. So whacky.

I know things have gotten better in the past 30 years but I am not exactly 100% sure. There is a difference between top-line outward facing multinationals and 2nd tier internal facing companies.
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Re: What do Bogleheads think of what happen to Japan?

Post by Normchad »

My understanding, is that Japanese cultural and economic norms are very different than they are in the US. And because of this, it is much harder for unfit businesses to dissolve and go out of business in Japan.

I haven’t studied up on it, but the impression I was left with is that “creative destruction” just doesn’t function there. Businesses are heavily cross-invested with their customers and suppliers. It’s just a lot harder to clean up messes. In short, the free flow of capital to, its highest uses is stunted there.

Also, I believe Japanese citizens are not the rabid consumers that US citizens are.

My takeaway, is that different countries are very different. And that I don’t truly understand them, and applying the ideas and principals that have long worked in the US, may not translate to other countries. They might, but I’m just not smart enough to know.

So I am always waffling on correct role of international equities in my portfolio.....
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Re: What do Bogleheads think of what happen to Japan?

Post by asif408 »

JoMoney wrote: Mon Sep 28, 2020 2:51 pm Interestingly, Japan's stock market has done better than other ex-US world stocks for the past 13 or so years...
Not by much but true: https://www.portfoliovisualizer.com/bac ... ion3_3=100

For those who say valuations don't matter, since Japan's valuations became more reasonable (late 2012) it has outperformed the international index by about 2%: https://www.portfoliovisualizer.com/bac ... ion3_3=100. Yet many here will still say how Japan has been a drag of international returns the last 30 years. Most of the poor performance from Japan came in the early and mid-1990s and the 2006-2012 time period.

Japan actually outperformed the US stock market and the international index from late 1998-2006: https://www.portfoliovisualizer.com/bac ... ion3_3=100. So over the last 30 years, it's been about 12 years of poor performance that accounts for the drag, and those two periods coincide with extremely high valuations.
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Re: What do Bogleheads think of what happen to Japan?

Post by petulant »

alex_686 wrote: Mon Sep 28, 2020 3:12 pm
Lynx310650 wrote: Mon Sep 28, 2020 1:02 pm I would love to know what percentage of people in Japan actually own stocks (or at least a meaningful amount as to where it would matter personally). My suspicion is it's quite low. Even in the USA it's only like 50% of the population owning stocks, right? I'd be shocked if it's anything close to that in Japan or was close to that back in the 90s. But I could be wrong.
30 years ago the majority of stock was owned by strategic partners, subsidiaries, or the banks that had lent companies in the first place. There were some great flow diagrams back in the day showing the incestuous relationships.
Exactly. Japanese retirees primarily rely on pensions, which haven't exactly gone the way of the dodo in Japan the way they're headed in the U.S.

It can be a whole different paradigm when you've got the interlocking bank, industrial company, technology company, pension fund, etc.
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Re: What do Bogleheads think of what happen to Japan?

Post by harrychan »

I grew up in Japan and this is just from my observations living there. The average citizen relies on their pension. Healthcare is nationalized and is extremely cheap. Most live in homes that are paid for and are multi-generational. The expectation is that the firstborn son is the caretaker of the parents when the time comes. Not many invest in the stock market. Maybe those who are more westernized or people that work in global economies. A lot of people just stash their cash in the bank or post office through CD's. It's probably partially due to the crash. The post office in Japan has the largest holdings of savings by far as people put their trust in them.
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Re: What do Bogleheads think of what happen to Japan?

Post by whodidntante »

stimulacra wrote: Mon Sep 28, 2020 12:40 pm On the other hand there are periodic reports of lonely seniors renting "fake" adult children to visit them and of others committing non-violent crimes because incarceration is a better financial outcome than their current situation.
That's not a bad idea for a warped, worst-case retirement plan! Not that I would recommend prison in America to anyone.

I'm still waiting on a thread here on Bogleheads where someone is going in for a long rest and asks about how to maximize Roth conversions or something. :P
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Re: What do Bogleheads think of what happen to Japan?

Post by 000 »

If the same were to happen to the US, it would be far worse here due to the sheer amount of individuals and organizations (e.g. pensions) that are depending on robust stock market returns and that continuing prosperity is one of the primary factors holding the US together (as opposed to shared cultural background).
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Re: What do Bogleheads think of what happen to Japan?

Post by DoTheMath »

whodidntante wrote: Mon Sep 28, 2020 5:41 pm
stimulacra wrote: Mon Sep 28, 2020 12:40 pm On the other hand there are periodic reports of lonely seniors renting "fake" adult children to visit them and of others committing non-violent crimes because incarceration is a better financial outcome than their current situation.
That's not a bad idea for a warped, worst-case retirement plan! Not that I would recommend prison in America to anyone.
That's my new fallback plan: Buy a one-way ticket to Iceland and commit a moderately serious crime :D

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Re: What do Bogleheads think of what happen to Japan?

Post by Robot Monster »

harrychan wrote: Mon Sep 28, 2020 5:33 pm I grew up in Japan and this is just from my observations living there. The average citizen relies on their pension. Healthcare is nationalized and is extremely cheap. Most live in homes that are paid for and are multi-generational. The expectation is that the firstborn son is the caretaker of the parents when the time comes. Not many invest in the stock market. Maybe those who are more westernized or people that work in global economies. A lot of people just stash their cash in the bank or post office through CD's. It's probably partially due to the crash. The post office in Japan has the largest holdings of savings by far as people put their trust in them.
Sorry..the post office? Sounds surreal, like something outta Haruki Murakami.
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Re: What do Bogleheads think of what happen to Japan?

Post by whodidntante »

Robot Monster wrote: Mon Sep 28, 2020 5:52 pm
harrychan wrote: Mon Sep 28, 2020 5:33 pm I grew up in Japan and this is just from my observations living there. The average citizen relies on their pension. Healthcare is nationalized and is extremely cheap. Most live in homes that are paid for and are multi-generational. The expectation is that the firstborn son is the caretaker of the parents when the time comes. Not many invest in the stock market. Maybe those who are more westernized or people that work in global economies. A lot of people just stash their cash in the bank or post office through CD's. It's probably partially due to the crash. The post office in Japan has the largest holdings of savings by far as people put their trust in them.
Sorry..the post office? Sounds surreal, like something outta Haruki Murakami.
They probably have fewer questions about how to send money that way. :happy
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Re: What do Bogleheads think of what happen to Japan?

Post by flah »

Robot Monster wrote: Mon Sep 28, 2020 5:52 pm
harrychan wrote: Mon Sep 28, 2020 5:33 pm I grew up in Japan and this is just from my observations living there. The average citizen relies on their pension. Healthcare is nationalized and is extremely cheap. Most live in homes that are paid for and are multi-generational. The expectation is that the firstborn son is the caretaker of the parents when the time comes. Not many invest in the stock market. Maybe those who are more westernized or people that work in global economies. A lot of people just stash their cash in the bank or post office through CD's. It's probably partially due to the crash. The post office in Japan has the largest holdings of savings by far as people put their trust in them.
Sorry..the post office? Sounds surreal, like something outta Haruki Murakami.
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Re: What do Bogleheads think of what happen to Japan?

Post by Robot Monster »

flah wrote: Mon Sep 28, 2020 6:08 pm
Robot Monster wrote: Mon Sep 28, 2020 5:52 pm
harrychan wrote: Mon Sep 28, 2020 5:33 pm I grew up in Japan and this is just from my observations living there. The average citizen relies on their pension. Healthcare is nationalized and is extremely cheap. Most live in homes that are paid for and are multi-generational. The expectation is that the firstborn son is the caretaker of the parents when the time comes. Not many invest in the stock market. Maybe those who are more westernized or people that work in global economies. A lot of people just stash their cash in the bank or post office through CD's. It's probably partially due to the crash. The post office in Japan has the largest holdings of savings by far as people put their trust in them.
Sorry..the post office? Sounds surreal, like something outta Haruki Murakami.
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Re: What do Bogleheads think of what happen to Japan?

Post by aarondearu »

whodidntante wrote: Mon Sep 28, 2020 5:54 pm
Robot Monster wrote: Mon Sep 28, 2020 5:52 pm
harrychan wrote: Mon Sep 28, 2020 5:33 pm I grew up in Japan and this is just from my observations living there. The average citizen relies on their pension. Healthcare is nationalized and is extremely cheap. Most live in homes that are paid for and are multi-generational. The expectation is that the firstborn son is the caretaker of the parents when the time comes. Not many invest in the stock market. Maybe those who are more westernized or people that work in global economies. A lot of people just stash their cash in the bank or post office through CD's. It's probably partially due to the crash. The post office in Japan has the largest holdings of savings by far as people put their trust in them.
Sorry..the post office? Sounds surreal, like something outta Haruki Murakami.
They probably have fewer questions about how to send money that way. :happy
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Re: What do Bogleheads think of what happen to Japan?

Post by frugalecon »

According to one study (https://www.nber.org/papers/w24614), labor force participation among the elderly has increased in Japan in recent years. That is one way to address shortfalls in retirement assets.
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Re: What do Bogleheads think of what happen to Japan?

Post by columbia »

Sub-optimal outcomes arent unique to this time period of Japan, but it also seems odd to sit around fearing them.
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Re: What do Bogleheads think of what happen to Japan?

Post by palanzo »

Robot Monster wrote: Mon Sep 28, 2020 5:52 pm
harrychan wrote: Mon Sep 28, 2020 5:33 pm I grew up in Japan and this is just from my observations living there. The average citizen relies on their pension. Healthcare is nationalized and is extremely cheap. Most live in homes that are paid for and are multi-generational. The expectation is that the firstborn son is the caretaker of the parents when the time comes. Not many invest in the stock market. Maybe those who are more westernized or people that work in global economies. A lot of people just stash their cash in the bank or post office through CD's. It's probably partially due to the crash. The post office in Japan has the largest holdings of savings by far as people put their trust in them.
Sorry..the post office? Sounds surreal, like something outta Haruki Murakami.
Not at all unusual in many countries, not just Japan.
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Re: What do Bogleheads think of what happen to Japan?

Post by firebirdparts »

I just got through reading Fully Grown by Dietrich Vollrath and it fully met my biases with confirmation. I already thought all the stuff he wrote. He does not at all resort to using Japan as an example, but you can clearly see that Japan is a highly developed economy, extremely so, with a low birth rate, extremely so, and no immigration, at a level beyond all human experience. There's simply no reason for the economy to keep growing, and not much demand for capital. They've got what they need.

Will this come to the whole world? Let's hope so. About a third of the world's population doesn't consume much of anything. Let's hope the growth goes there in a way that doesn't put a big strain on the environment. That's what I think.

People who talk in platitudes will struggle to deal with a situation where stagnation is the best option, and a lot of politicians would be in that category if not all of them. I am amazed at how well the whole developed world is getting along, but I realize I'm the only one.
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Re: What do Bogleheads think of what happen to Japan?

Post by JBTX »

The argument for US only investing includes the fact that US companies get a big chunk of their revenue, 40% or more from overseas. Japan currently is about 58% a record high. I can't find what it was in 1991, but it's pretty safe to say it was a decently high number.

In other words, the fact that Japanese companies had substantial worldwide revenue did not help Japanese investors.

Even though the market has never recovered from the peak, Japanese corporate earnings have increased 150% since then.
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Re: What do Bogleheads think of what happen to Japan?

Post by jdamo »

This has been an interesting thread. I was wondering if the US could go like Japan also recently.....
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Re: What do Bogleheads think of what happen to Japan?

Post by 552BB »

Hello BH,


JBTX wrote: Mon Sep 28, 2020 8:57 pm The argument for US only investing includes the fact that US companies get a big chunk of their revenue, 40% or more from overseas. Japan currently is about 58% a record high. I can't find what it was in 1991, but it's pretty safe to say it was a decently high number.

In other words, the fact that Japanese companies had substantial worldwide revenue did not help Japanese investors.

Even though the market has never recovered from the peak, Japanese corporate earnings have increased 150% since then.


This is an interesting bit of information.

I will put a little bit of study into this.



Thanks
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Re: What do Bogleheads think of what happen to Japan?

Post by infotrader »

My main and only concern is the aging and shrinking population of Japan.

"Over 8 million Japanese workers are 65 or older, a staggering 12 percent of the entire workforce, government data shows. The old-age dependency ratio is over 50 percent, and is expected to rise to nearly 80 percent by 2050, the OECD says.

The average employee pension in Japan is about 150,000 yen ($1,350.01) a month, lower than government’s target of 60 percent of the pre-retirement income for salaried workers, which would be 220,000 yen on average.

Some economists expect the average pension-to-wage ratio to keep deteriorating and worries are growing that Japan’s ‘pay-as-you-go’ pension scheme may be unsustainable, with fewer workers paying into it and more elders drawing from it."

People need to withdraw money for their retirement, so it is difficult to support the growth of stock market.
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Re: What do Bogleheads think of what happen to Japan?

Post by Hustlinghustling »

you need to remember to add back dividends though.
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Re: What do Bogleheads think of what happen to Japan?

Post by dru808 »

wolf359 wrote: Mon Sep 28, 2020 1:22 pm
zetsui wrote: Mon Sep 28, 2020 12:34 pm Their stock market peaked around '91 and has been that or less for the last 30 years.

How would Boglheads deal with a similar situation in the US? And what can we learn from JPN?

What [expletive removed by admin LadyGeek] did retirees in JPN end up doing?
Think about what that means. 30 years ago, the Japanese stock market peaked. If you were a Japanese Boglehead starting in 1991, the market was at its peak, but you had nothing invested. You were then investing regularly for the next 30 years, up to present day. How do you think your portfolio would look?

Spoiler alert: it depends on your asset allocation. Remember, you don't have a lifetime of savings in 1991 and hold for 30 years. You start with 0 and invest over time, buying more as the market dropped. If you have bonds or US stocks in your asset allocation, your annual rebalance increases your return. It isn't a total disaster. Actually, even investing 100% in the Japanese market isn't a disaster. The peak is a one-time event. The long sideways movement since then still allows a reasonable return. Sure, it's not US market return, but it's still a significant accumulation.

Diversifying into bonds and into international (for Japan that includes a hefty slug of the US market), and you'd be okay.

If you want to run some numbers yourself, go to portfoliovisualizer.com. Use EWJ as a proxy for the Japanese stock market. (I think that only goes back to 1999.) Then play with different assumptions. I also used CASHX as a cash proxy (I don't have the ticker for a Japanese bond or treasury equivalent, and cash is like sticking your money in a mattress or bank account.)

Someone who retired in Japan in 1991 at the peak of the market would be in trouble if they had 100% of their stocks in Japan. But if they split it to 1/3 each of Japanese stocks, Bonds/cash, and S&P 500, they'd probably have been okay as well. Remember, few people buy their entire portfolio at the peak of the market. They accumulate over many years, then withdraw over many years. When that is taken into account, and if combined with diversification strategies, disaster can be avoided. The market peak was achieved in a relatively short period of time. The funds invested over a career probably took longer. Someone who achieved their FI number in 1991 on the market alone would probably have to keep working longer.
Great write up :moneybag :beer
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Re: What do Bogleheads think of what happen to Japan?

Post by OnTrack »

firebirdparts wrote: Mon Sep 28, 2020 8:45 pm I just got through reading Fully Grown by Dietrich Vollrath and it fully met my biases with confirmation. I already thought all the stuff he wrote. He does not at all resort to using Japan as an example, but you can clearly see that Japan is a highly developed economy, extremely so, with a low birth rate, extremely so, and no immigration, at a level beyond all human experience. There's simply no reason for the economy to keep growing, and not much demand for capital. They've got what they need.

Will this come to the whole world? Let's hope so. About a third of the world's population doesn't consume much of anything. Let's hope the growth goes there in a way that doesn't put a big strain on the environment. That's what I think.

People who talk in platitudes will struggle to deal with a situation where stagnation is the best option, and a lot of politicians would be in that category if not all of them. I am amazed at how well the whole developed world is getting along, but I realize I'm the only one.
I don't think you are the only one. See writings and videos by the late Professor Al Bartlett. He points out that the way exponential growth works, it may seem as though there are plenty of resources until just before they are about to be used up. See his "bacteria in a bottle lecture." https://m.youtube.com/watch?v=73xdpoQFLQk

https://en.m.wikipedia.org/wiki/Albert_Allen_Bartlett
https://m.youtube.com/watch?v=O133ppiVnWY
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Re: What do Bogleheads think of what happen to Japan?

Post by wolf359 »

Robot Monster wrote: Mon Sep 28, 2020 5:52 pm
harrychan wrote: Mon Sep 28, 2020 5:33 pm I grew up in Japan and this is just from my observations living there. The average citizen relies on their pension. Healthcare is nationalized and is extremely cheap. Most live in homes that are paid for and are multi-generational. The expectation is that the firstborn son is the caretaker of the parents when the time comes. Not many invest in the stock market. Maybe those who are more westernized or people that work in global economies. A lot of people just stash their cash in the bank or post office through CD's. It's probably partially due to the crash. The post office in Japan has the largest holdings of savings by far as people put their trust in them.
Sorry..the post office? Sounds surreal, like something outta Haruki Murakami.
The Post Office in most countries is an institution that is everywhere. Many countries had their post offices act as limited or full banks, acting as a bank substitute for people who otherwise have access to one. This includes the United States from 1911-1967. During the Great Depression, when private banks were failing and losing public trust, the Postal Banks actually had 10% of all commercial banking business in the US. The idea isn't that farfetched -- the USPS already offers simple services such as money orders and international money transfers.
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Re: What do Bogleheads think of what happen to Japan?

Post by teelainen »

Anything is possible. 30 years into the future, the DOW could be at 20,000

Or it could be at 200,000
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Re: What do Bogleheads think of what happen to Japan?

Post by CyclingDuo »

teelainen wrote: Tue Sep 29, 2020 7:33 am Anything is possible. 30 years into the future, the DOW could be at 20,000

Or it could be at 200,000
And people will still be referencing Japan's stock market peak of 1991... :mrgreen:
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Re: What do Bogleheads think of what happen to Japan?

Post by JoMoney »

wolf359 wrote: Tue Sep 29, 2020 7:02 am
Robot Monster wrote: Mon Sep 28, 2020 5:52 pm
harrychan wrote: Mon Sep 28, 2020 5:33 pm I grew up in Japan and this is just from my observations living there. The average citizen relies on their pension. Healthcare is nationalized and is extremely cheap. Most live in homes that are paid for and are multi-generational. The expectation is that the firstborn son is the caretaker of the parents when the time comes. Not many invest in the stock market. Maybe those who are more westernized or people that work in global economies. A lot of people just stash their cash in the bank or post office through CD's. It's probably partially due to the crash. The post office in Japan has the largest holdings of savings by far as people put their trust in them.
Sorry..the post office? Sounds surreal, like something outta Haruki Murakami.
The Post Office in most countries is an institution that is everywhere. Many countries had their post offices act as limited or full banks, acting as a bank substitute for people who otherwise have access to one. This includes the United States from 1911-1967. During the Great Depression, when private banks were failing and losing public trust, the Postal Banks actually had 10% of all commercial banking business in the US. The idea isn't that farfetched -- the USPS already offers simple services such as money orders and international money transfers.
Coincidentally a new 'postal banking act' has been introduced in the US senate a couple time in recent years. Conceptually to provide small dollar amount loans and transaction accounts for people that are otherwise unbankable (like having bad marks in the ChexSystem) at a commercial bank
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Re: What do Bogleheads think of what happen to Japan?

Post by Nicolas »

I remember at the time, 1989, when it was still soaring, a financial commentator said “Leave it to the locals”. How right he was!

The common wisdom at the time was that Japan was taking us over economically. They were buying up property in NYC. The Imperial Palace grounds in Tokyo were worth more than the State of California! Shiploads of small high-quality fuel-efficient cars were being unloaded in port cities. Our car companies were on the ropes, our TV manufacturers out of business. They were taking us over!

China wasn’t even on the radar then, they were still benighted in communism.
Last edited by Nicolas on Tue Sep 29, 2020 10:09 am, edited 3 times in total.
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Re: What do Bogleheads think of what happen to Japan?

Post by UpsetRaptor »

Japan had CAGR > 20% over 40 years heading into their crash. I'm sure most of their retirees were fine.
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Re: What do Bogleheads think of what happen to Japan?

Post by Robot Monster »

JBTX wrote: Mon Sep 28, 2020 8:57 pm The argument for US only investing includes the fact that US companies get a big chunk of their revenue, 40% or more from overseas. Japan currently is about 58%, a record high.
In 2016, at least, Japanese equity market revenue sources were:

Image
Source
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Re: What do Bogleheads think of what happen to Japan?

Post by dml130 »

firebirdparts wrote: Mon Sep 28, 2020 8:45 pm I just got through reading Fully Grown by Dietrich Vollrath and it fully met my biases with confirmation. I already thought all the stuff he wrote. He does not at all resort to using Japan as an example, but you can clearly see that Japan is a highly developed economy, extremely so, with a low birth rate, extremely so, and no immigration, at a level beyond all human experience. There's simply no reason for the economy to keep growing, and not much demand for capital. They've got what they need.

Will this come to the whole world? Let's hope so. About a third of the world's population doesn't consume much of anything. Let's hope the growth goes there in a way that doesn't put a big strain on the environment. That's what I think.

People who talk in platitudes will struggle to deal with a situation where stagnation is the best option, and a lot of politicians would be in that category if not all of them. I am amazed at how well the whole developed world is getting along, but I realize I'm the only one.
Very intriguing, thank you for posting that! I've always wondered if the socioeconomic situation in Japan is misinterpreted in an overly negative way due to viewing things through a mostly capitalist lens. I'll add that book to my list.
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Re: What do Bogleheads think of what happen to Japan?

Post by mak1277 »

My belief (based on nothing) is that if the US went into a similar funk as what happened in Japan, the rest of the world would follow and your money wouldn't be safe anywhere. America is still the straw the stirs the drink for the near future at least.
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Re: What do Bogleheads think of what happen to Japan?

Post by vitaflo »

Japan is why I have a dynamic asset allocation. If the US went to the CAPE levels of Japan in the early 90's then I'd have over twice what I need to retire on. There would be little reason to take risk at that point and my AA would have shifted to something much more conservative than it is today. This would smooth out the worst of the rise and fall. It's why I don't use age-based AA's.

Japan is also the reason I invest in international. Could the US end up like Japan? While it's not likely, it is possible, and I'll be able to meet my financial goals even if international continues to lag, so taking that black swan risk off the table helps me sleep at night, however unlikely the risk may be.

Certainly Japan had and has a very unique set of demographics/economics/history that is probably only relevant to Japan. But it doesn't mean that other countries, including the US, don't have their own unique set of circumstances that could cause similar long-term systemic issues. What they are or whether they will happen I do not know. That's why I buy the haystack and take what I get.
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Re: What do Bogleheads think of what happen to Japan?

Post by EnjoyIt »

whodidntante wrote: Mon Sep 28, 2020 5:41 pm
stimulacra wrote: Mon Sep 28, 2020 12:40 pm On the other hand there are periodic reports of lonely seniors renting "fake" adult children to visit them and of others committing non-violent crimes because incarceration is a better financial outcome than their current situation.
That's not a bad idea for a warped, worst-case retirement plan! Not that I would recommend prison in America to anyone.

I'm still waiting on a thread here on Bogleheads where someone is going in for a long rest and asks about how to maximize Roth conversions or something. :P
A short prison stent may be a cheap way to get some healthcare issues taken care of. Not my ideal plan 😳
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
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