The Definitive Guide To Financial Planning
The Definitive Guide To Financial Planning
"After a two-decade bear market, now is the time to buy and hold Japanese stocks, Marc Faber, publisher of the Gloom, Boom & Doom report, said.But wait. What's this?
Here's Dennis Gartman with a nuance:
"Japan is demographically and fiscally doomed. Her population is collapsing in size and growing elderly at the same time, while her fiscal circumstances are far and away the worst of the industrialized world. Japan has survived for decades in a strange world of fiscal irresponsibility by being able to sell her debt to her own people rather than to the rest of the world as the US can do and must."
Of course, this just supports our position. The Japanese soon will have a bitter choice. Either they abandon their whole silly economic model - with its eternal stimulus budgets and its perpetual zero interest rates. Or they print money. If they give up, it will bring on the final and devastating bottom of their 21-year slump. If they print money, on the other hand...they might hold off the disaster long enough to make it worse.
It is a bit like their situation after the Battle of Midway. Had they examined their situation carefully, they would have seen that the gods of war had gone over to the over side. They faced a superior adversary. And they were out of fuel. They needed control of the seas in order to re-supply; and they had just lost it.
What to do? They had a choice. They could have pulled back to the home island, begged forgiveness and negotiated a settlement. Instead, they soldiered on...in a long, hard, nasty retreat...and eventually turned to kamikaze pilots to try to save the day.
What choice will they make this time. Probably, they'll print money. Inflation rates will rise. Japanese government bonds will collapse. And investors will try to protect themselves from inflation by buying stocks.
*** Let's look at the US. What is different in America, compared to Japan?
Huge deficits? Check.
Zero interest rates? Check.
Great Correction? Check.
Out-of-control spending on old people? Check. (About which, more tomorrow...)
In Japan, the financial structure will come down when the country has to begin relying on foreign investors to fund its deficits. The foreigners will look at the figures and inevitably want higher interest rates to protect them against defaults and inflation.
But the US already counts on foreign investors to fund its huge deficits.
Which one will get blown away first? Our money is on Japan.
*** Want a peek at the future? The New York Times gave it to us last week:
"Vallejo, a city about 25 miles north of San Francisco, offers a sneak preview of what could be the latest version of economic disaster. When the foreclosure wave hit, local tax revenue evaporated. The city managers couldn't make their budget and eliminated financing for the local museum, the symphony and the senior center. The city begged the public-employee unions for pay cuts - all to no avail. In May 2008, Vallejo filed for bankruptcy. The filing drew little national attention; most people were too busy watching banks fail to worry about cities. But while the banks have largely recovered, Vallejo is still in bankruptcy. The police force has shrunk from 153 officers to 92. Calls for any but the most serious crimes go unanswered. Residents who complain about prostitutes or vandals are told to fill out a form. Three of the city's firehouses were closed. Last summer, a fire ravaged a house in one of the city's better neighborhoods; one of the firetrucks came from another town, 15 miles away. Is this America's future?*** "I have a headache...well, it's like a headache...but not exactly."
Our 89-year-old mother was doing something unusual. She was talking about herself. Yesterday, for the first time we can recall, she asked to go to the doctor.
In the 62 years we have known her, we've never heard a complaint. We thought she was just stoic. And now, we presumed she suffered in silence from the aches and pains that are bound to assault an octogenarian.
Maybe. Or maybe she just had nothing to complain about.
"I guess at my age, I should be used to a little headache. But I don't think I've ever felt anything like it. I was worried that I was having a stroke. But I don't have any of the signs of a stroke. Everything seems to work just as it did before. Which was not all that great.
"But I'm just so happy to be alive. And to have my wits about me. I was hoping to go to a birthday party for Uncle Jules (her brother). He's turning 94 this week. But he insisted on not having a party. He said we can have a birthday party for him next year, when he turns 95.
"That seems rather too optimistic, don't you think?
"Last month, Jules had an auto accident. You know, when you're driving at 94 and you have an accident, everyone assumes it's your fault. But the car that ran into him was driven by a guy who was 85; he was at fault. I don't know what the policeman must have thought."
*** Speaking of old people, are they really egotistical and selfish? We'll talk about it tomorrow...
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.