Real Estate/Mortgage Loan/Stock Market

[squiffy]

Note. Some insurance is cost effective. I pay maybe $1400 a year in car insurance for two cars with 50/100K coverage.

For homeowners ins. in TX and CA I pay about $900 per year to insure against fire and hazard.

The puts seem way too expensive on stocks like HOV, CFC, MTG. Any ideas or thoughts.

[laserboy]

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Japanese basically don't invest. They save at low rates.

They don't have as strong and diversified a stock market as we do and the average Japanese simply doesn't invest as much as the average American. Think America in the 1940s or 1950s when investing was still only for the wealthy and not really for the masses.

There is much more corruption in Japan. And Japanese banks have not written off their bad loans. So there are lots of structural, legal, and socio-cultural problems with the Japanese economy.


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The Japanese don't invest? Are you selectively forgetting the 1950's-1980's? Japanese investment activity reached feverish heights during the 1980's. They used EXTREME amounts of leverage just as US investors did in the 1920's and are have done for the past few years (and that you are suggesting people should do today).

By the way, in the 1930's the US enacted laws to limit the amount of stock that investors could buy using leverage to prevent the lemmings from doing what they are doing today. I believe the same thing will happen several years from now with respect to real estate.

And yes, the Japanese banking system is in shambles. That is what happens when your banking system collapses and they have done a poor job rebuilding.

The Japanese financial system is corrupt? We are not exactly Switzerland ourselves. How sound do you think our banking system is? Are you aware of the fact that banks currently lend out on average of 120% of their deposits? If you don't like 100 year mortgages, how do you feel about interest only or negative amortization loans that or option ARMs that balloon after several years?

The Freedom Home Equity Loan

[squiffy]

Japanese companies invest. Individual Japanese workers do not.

There is a difference between Bank of America or Bank of Japan and John Smith or Kenichi Tanaka.

John Smith has a 401k and invests in the stock market. Individual U.S. investment in stocks has grown a lot over the past 30 years.

You will find that in Japan, the average person is much less likely to own stocks.

Read a few books on the Japanese government and economy.

I am saying the average American is taller than the average Japanese. There are differences. You are saying some Japanese are tall. Both are true. But culturally, politically, and economically a lot of differences too numerous to describe here.

Do you know about the Liberal Democratic Party in Japan? Not really a two party system as we have here. Much more corruption.

Lots of ties between Yakuza and government officials etc.

Yes America has corruption. But overall, it's much worse in Japan, the Phillipines, and Mexico.

First, America has a lot more natural wealth to spread around, land, natural resources per capital. Second, we have a lot more checks and balances in our government.

Remember the Mexican president Salinas who was actually implicated, through his brother, in drug money and murder. Yes, we have Richard Nixon, but as far as I know he didnt take money from drug lords or have any political rival or dissident bumped off.

[laserboy]

Are you saying the reason the Japanese asset markets have been depressed the past 15 years is because the average Japanese citizen has a predisposition not to invest in the markets (I do not agree with this assertion, BTW)? Since the Japanese save so much more money than Americans, then where is this money going? I agree with you that it is not going into the stock market, but then that is plainly obvious. Americans were not investing in stocks in the 1930's either. I contend that the depressed markets are the result of the contraction of credit and deflationary monetary conditions even in the face of negative real interest rates.

And to say that the average US citizen invests more than the average Japanese citizen is ludicrous. The average US citizen curently has a ZERO percent savings rate. The average US worker has like 50 grand in their 401K.

And our vast reservoir of wealth and natural resources certainly do not seem to be generating much wealth for the country. The last time I checked, we were running a trade deficit of several hundred billion a year. As opposed to the Japanese who manufacture many consumer goods products and have continued to run a vast budget surplus even throughout their recession. Of course, unlike the US, they actually have a strong manufacturing base and an highly educated workforce.

What do we produce as a country that will sustain our economy in the face of a real estate downturn? Here is a good article on the topic:

http://www.nytimes.com/2005/08/12/op...12krugman.html

[Emperor]

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Since the Japanese save so much more money than Americans, then where is this money going?

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They don't save it they spend it. The cost of living there is higher than in the US, AND they spend it on social welfare programs like European countries do. These are the reasons why their economy, along with France and Germany's has ground to a halt.

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I agree with you that it is not going into the stock market, but then that is plainly obvious. Americans were not investing in stocks in the 1930's either. I contend that the depressed markets are the result of the contraction of credit and deflationary monetary conditions even in the face of negative real interest rates.

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Contraction of Credit? - NOT
Deflation - Maybe, I wonder how many people in Japan see the cost of goods going down? I doubt too many.

I really think the reasons are: 1. They grew overly fast creating a bubble 2. It burst when they out paced the world's demand for their particular markets, for the price they could provide them at. (As the Japanese got wealthy, they were unable to produce products as cheap as before) 3. They started taxing the rich, giving to the poor and encouraging people not to work.

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The average US citizen curently has a ZERO percent savings rate. The average US worker has like 50 grand in their 401K.

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Eh? [img]/images/graemlins/confused.gif[/img]

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The last time I checked, we were running a trade deficit of several hundred billion a year. As opposed to the Japanese who manufacture many consumer goods products and have continued to run a vast budget surplus even throughout their recession.

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Oh Good Point! This is definitely a reason for their slump. While Americans run a HUGE and PROFITABLE trade deficit, by buying lowpriced goods from around the world, and then investing all of that leftover cash into more profitable returns.

Checkout Free Trade to see why running a trade deficit is AWESOME! It also shows how increasing trade deficits are a leading indicator of economic upswings.


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Of course, unlike the US, they actually have a strong manufacturing base and an highly educated workforce.

What do we produce as a country that will sustain our economy in the face of a real estate downturn? Here is a good article on the topic:

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Well if you checkout Exports You will see all of the wonderful things that the US exports... While demonrats believe that JOBS are at the top of the list, it is totally untrue. We export High dollar items. Airplanes. Nuclear Reactor components. Cars. Etc.

Do we risk outstripping demand for those items and running into the same problems that Japan has? We sure do. ESPECIALLY if we keep letting our government stamp each tax dollar into a nickel before passing it on to the "disabled" and the welfare mom's whom we encourage not to work. We may only have 5% unemployment but only 2/5 of the population is employed, and only 2/5 of those are employed at the same place for more than 6mos out of the year. This is an incredible burden on our society and economy.

[laserboy]

I do not disagree with you that the Japanese government has handled their depression with extremely poor fiscal and monetary policy.

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Contraction of Credit? - NOT
Deflation - Maybe, I wonder how many people in Japan see the cost of goods going down? I doubt too many.




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Maybe "contraction" is not the word I was looking for. Perhaps "destruction" of credit. When that many loans go bad, it is essentially equivalent to having billions of dollars sucked out of the asset markets. Furthermore it leaves the banking in shambles and unable to finance further economic expansion. As far as deflation is concerned, this is well documented. Japanese real estate, for example, prices have declined for 15 straight years.

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Eh?


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Bad news on savings

Regarding the trade deficit, I trust Warren Buffett's evaluation of the trade deficit issue more than I trust yours or mine.

Why I'm not buying the U.S. dollar

Also I am not a "democrat". I am probably the most fiscally conservative person I know.

[squiffy]

With regard to savings, the average savings rate in Japan is supposed to be higher than in the U.S. A higher percentage of income. But the Japanese income may or may not be higher than in the U.S.

To the extent that Japanese save, they put their money in bank accounts, not on the stock market.

Also, there are 250 million or so Americans. Perhaps 100 million Japanese. So even if the American savings rate is lower, the total amount and percentage of savings invested in stocks is greater in America.

Some Americans do save and invest.

Also, even if an American and a Japanese earn the same amount, if the Japanese pays more for land and housing as a percentage of income than an American, because of crowding and overpopulation, the Japanese person actually has a lower standard of living.

I moved from LA to Fresno. I could not afford a home in LA. I could afford a 4 bedroom 1800 sq ft home in Fresno in a nice neighborhood.

The numbers never tell the whole story.

Chinese may save 50% of their income, but if they only earn $300 a year per capita, that doesn't make for a huge capital market or stock market, at least not based on individual investment.

You are reading a lot into my statements that I never intended.

In America, over time the percentage of savings invested in stocks has increased tremendously. Due to the rise of cheap internet trading, mutual funds, retirement accounts. Etc. These are all features of the American economy and American laws.

Many other nations simply don't have as well-developed a financial system and most individuals in many other nations don't have ready access to a liquid stock market.

http://www.kc.frb.org/publicat/econrev/pdf/2q94morg.pdf

In Japan, most people put their money in postal savings accounts at low interest. Much less common in Japan to invest in the stock market.

http://www.stat.go.jp/english/data/h...ont.htm#cha4_3

I am just stating simple facts.

A very high percentage of Americans own stocks, relative to citizens in most other nations. That's just true.

And a huge and growing percentage of American individual household wealth is being invested in the stock market. This isn't necessarily the case in other countries. The same shift might be happening, but our shift started a lot earlier and is much more significant in absolute terms.

You are drawing conclusions about things I never mentioned in my original post.

[squiffy]

This data is old from 1999, but gives some stats on percentage of American households investing in stocks.

http://www.americanshareholders.com/...y/children.php

http://www.ici.org/shareholders/dec/...ty_owners.html

Do you think in 1999 half of individual Japanese households some form of their wealth in stocks? NOT CORPORATIONS OR BANKS. Individual Japanese.

[laserboy]

OK I am just arguing with you over semantics then. I meant that the Japanese do invest, just currently not in the stock or real estate markets.

You are correct that in the US the current model of financial thought currently favors investing in the stock market (stocks always go up in the long run, etc.) and real estate market (real estate only goes up or sideways, etc.)and that in Japan most people currently favor investing in bank accounts. I contend that these trends will shift over time.