Thread: Stock markets growth explanation?

.

From what I've read, Japan's markets have failed largely due to unwillingness for it's citizens to invest. They have huge savings but have been extreme risk adverse.

I'm curious, how were the Japanese total returns? Stock price is only part of the picture; for example, a stock with a flat price over time can still be a good investment if it maintains high dividend yields. (A lot of people get this wrong when looking at the US market flat periods as well).

.

Originally Posted by Stanley514

From what I've read, Japan's markets have failed largely due to unwillingness for it's citizens to invest. They have huge savings but have been extreme risk adverse.

What`s about citizens of all other countries, including U.S.? Don`t they want to invest in Japanese stocks? What is the reasons for Americans to refuse to purchase Sony or Toyota stocks?Patriotic fealings?

Don't know about the their entire market, But looking at Toyota for example, its price has roughly doubled since 1994 while Sony has been about flat during the same time.

If currently Dow is 12.000 points and in 1984 it was 1.100 points,does that mean that currently average U.S. citizens have 10 time more investments in stocks than back in 1984?Or it grows mostly due to the richest part of population investments?

Yes. Both effects. A much larger segment of the population invest now, mostly because it's so easy to do so, but as always the wealthy holding the most sway.

I dont know, maybe because that they stopped releasing the M3 index, and that billionaires dont buy a billion hamburgers, and that we dont refer to higher stock prices as inflation?

.

Japan's financial system isn't as stable as the USA's. Wiki doesn't do too bad a job describing it.

Economic history of Japan - Wikipedia, the free encyclopedia


Basically Japan had already made most of the mistakes in the late 1980's and early 1990's that the USA would go on to make in the 2000's.

During the 1980s, the Japanese economy shifted its emphasis away from primary and secondary activities (notably agriculture, manufacturing, and mining) to processing, with telecommunications and computers becoming increasingly vital. Information became an important resource and product, central to wealth and power. The rise of an information-based economy was led by major research in highly sophisticated technology, such as advanced computers. The selling and use of information became very beneficial to the economy. Tokyo became a major financial center, home of some of the world's major banks, financial firms, insurance companies, and the world's largest stock exchange, the Tokyo Securities and Stock Exchange. Even here, however, the recession took its toll. In 1992, the Nikkei 225 stock average began the year at 23,000 points, but fell to 14,000 points in mid-August before leveling off at 17,000 by the end of the year.

They moved away from manufacturing toward a service based economy, and (as I suspect always happens to service based economies) bubbles started to form in the real estate market, money lenders started giving out money too easily to people who didn't deserve credit..... etc.... the same story you hear about the USA's recession.

"Service based economy" is just a euphemism for "all middle men" economy. They want commissions, so they spur activity any way they can. They get a piece of every transaction, both as the bubble builds, and as it deflates.

The easily obtainable credit that had helped create and engorge the real estate bubble continued to be a problem for several years to come, and as late as 1997, banks were still making loans that had a low guarantee of being repaid. Loan Officers and Investment staff had a hard time finding anything to invest in that would return a profit. Meanwhile, the extremely low interest rate offered for deposits, such as 0.1%, meant that ordinary Japanese savers were just as inclined to put their money under their beds as they were to put it in savings accounts. Correcting the credit problem became even more difficult as the government began to subsidize failing banks and businesses, creating many so-called "zombie businesses". Eventually a carry trade developed in which money was borrowed from Japan, invested for returns elsewhere and then the Japanese were paid back, with a nice profit for the trader.