Tokyo Takes from Japan Investor.com

China Import Data: Bad News for Japan's Exports

noreply@blogger.com (www.JapanInvestor.com) — Thu, 26 Jan 2012 17:37:00 PST

China’s imports from Japan in December fell 16.2%, while imports from Taiwan fell 6.2%. Rail, road, river and air freight volume for the whole of China fell 1.7% mo-mo in November (latest data). Chinese electricity use was flat in over the Autumn, with a sharp fall in the (year-on-year) growth rates from 8.9% in September, to 8% in October, and 7.7% in December. In other words, the bottom-up data suggest the 8.9% GDP growth number in Q4 for China is weaker than it looks.

Trade pressures are pushing Tokyo even closer to Beijing, using China’s usually reliable growth to make up for tightening markets in the West. Problem is, China's import demand could be sputtering. Japan's total exports fell for a third consecutive month in December (-8% YoY), capping the first annual trade deficit since 1980. Japan's yen-denominated exports to China turned negative YoY in April, and the provisional decline in December was a high two-digit minus 16.2% YoY. In other words, the decline appears to be accelerating.

Telegraph
Trade Statistics of Japan

Greek Debt Restructuring Most Immediate Euro Problem, But Then There's Portugal

noreply@blogger.com (www.JapanInvestor.com) — Thu, 26 Jan 2012 17:12:00 PST

The haggling over how big a haircut the private sector creditors will have to take is the most immediate Euro debt crisis problem, but the deadline for the negotiations in 20 March. In the meantime, the ECB's second round of 3-year LTRO is due in late February, while the ECB has also dramatically widened collateral standards and the Fed's USD forex swap supply remains at a high level while the Fed renewed its promise of low rates through 2014.

Thus the risk-on trade can continued for the foreseeable future, but investors cannot assume the coast is clear once the Greek debt haircuts are determined. According to the Kiel Institute for the World Economy, Portugal is also fighting a losing battle to contain its public debt and may be also forced to impose haircuts of up to 50% on private creditors.

Bottom line, the ECB (LTRO, easy collateral) and Fed's back-door (FX swaps) monetization are buying time, while the structural debt problem continues to worsen.

The Telegraph

Greece: Hedge Funds Can't Exactly Foreclose on the Acropolis

noreply@blogger.com (www.JapanInvestor.com) — Thu, 26 Jan 2012 16:37:00 PST

Greece is broke. But there's no blueprint for a country to declare bankruptcy, so Greece's creditors are sort of making things up as they go along. In recent creditor negotiations with Greece, the hedgies put a 50 haircut on the table, but the Greek side sent it back. Discuss. Start over.

Greece only has enough money to make it until March 20. It needs the next round of bailout money. But in order to get that money, Greece has to cut a deal. However, what do the hedge funds actually have for leverage? They can't exactly foreclose on the Acropolis.

NPR

The Age of Austerity

noreply@blogger.com (www.JapanInvestor.com) — Thu, 26 Jan 2012 16:27:00 PST

"We are in a period of transformation. We are exiting the Age of Entitlement that was characterized by leverage, lax lending standards and the general belief that trees and home prices grew to the sky. The Age of Austerity that is now unfolding is consequential for investors of all types. Balance sheet strength and fiscal responsibility will be emphasized. As we traverse this secular journey, the process will not be easy. There will be winners and losers, and the risk of unintended consequences will be high."

Pensions and Investments

Yahoo's 35% Stake in Yahoo Japan on the Block

noreply@blogger.com (www.JapanInvestor.com) — Thu, 26 Jan 2012 01:20:00 PST

Yahoo Inc's 25% stake in Yahoo Japan is on the block, and the two companies are in talks on how the Yahoo parent can sell its stake in Yahoo Japan, which is worth over $6 billion. The other large holder is Softbank Corp. which owns a 42% stake.

News on Japan

Japan Government to Bail Out TEPCO

noreply@blogger.com (www.JapanInvestor.com) — Thu, 26 Jan 2012 01:08:00 PST

TEPCO, or Tokyo Electric Power, is to be taken over by the government through a $13 billion bailout through the injection of JPY1 trillion ($12.8 billion) in public funds, making it one of the biggest bailouts outside Japan's banking sector. Instead of being directly burdened with liabilities associated with its despicable handling of the Fukushima nuclear disaster, these liabilities have been taken over by the government-backed Nuclear Damage Liability Facilitation Fund, while TEPCO has been balking at having the Fund take at least a 66% stake in the Company.

Foreign investors who initially jumped in assuming this bail out have gotten their fingers burned on the stock, which remains but a fraction of its former self.

The Crash and Burn of TEPCO's Stock

Tokyo Electric Power Gets a $13 Billion Bailout

Japan's NEC to Slash 10,000 Jobs by September

noreply@blogger.com (www.JapanInvestor.com) — Thu, 26 Jan 2012 00:58:00 PST

NEC Corp said on Thursday it aims to shed 10,000 jobs by the end of September, and would fail to reach a target to raise sales to 4 trillion yen ($51.13 billion) by March 2013. The company will eliminate almost 1 in 10 of its workers, are to trim costs after the electronics maker announced a loss of 87 billion yen ($1.11 billion) for the three months to December 31. The Company, which employs 115,840 people worldwide, said it will book a 40 billion yen charge in the business year ending on March 31 to pay for the restructuring.

Reuters

Average Investors Can Beat "Smartest Guy in the Room" Hedge Funds

noreply@blogger.com (www.JapanInvestor.com) — Wed, 25 Jan 2012 23:20:00 PST

Broadly speaking, hedge funds were one of the worst investments in 2011, with aggregate hedge fund performance indices showing losses approaching 10% in 2011, after mediocre 1-digit gains in 2010.
Since there is a strong survivor bias in the aggregate hedge fund performance indices, the actual return to hedge fund investors over the past two years may be more like a two-digit loss. On the other hand, a passive investment in the SPDR S&P 500 ETF (SPY) would have returned 16.7% over the same period of time.

Despite all the marketing hype about “proprietary models” and "quantitative black boxes, most hedge funds are basically trend followers, using simple momentum-following strategies that get chopped up in volatile markets like everyone else. Long-short equity strategies make money from buying winners and selling short losers, but high correlations between S&P 500 sectors and between global equity indices like in 2011 in a lot of whiplash.

Finally, the recent returns simply to not justify the hefty management fees that the industry charges.

Forbes

Fiscal Consolidation and Tigher Credit a Recipe for Lower Global Growth

noreply@blogger.com (www.JapanInvestor.com) — Wed, 25 Jan 2012 22:25:00 PST

IMF economist Olivier Blanchard says most advanced economies are trying to revive economic growth with their foot on the brake, not the accelerator. The first fiscal consolidation, which while considered necessary, is stunting demand. The second is tight credit, as the balance sheets of many banks, particularly in Europe, have lots of impaired assets that need to be written down. As banks de-lever, tighter credit to households or firms is restricting economic recovery.

IMF Direct

SP 500 Due for a Correction?

noreply@blogger.com (www.JapanInvestor.com) — Wed, 25 Jan 2012 22:18:00 PST

Source: The Growth Stock Wire

This technical analysis of the VIX (Bollinger bands) indicates the S&P 500 is overbought and due for a correction.

VIX Indicates S&P 500 Overbought, Due for a Correction

Japan's First Trade Deficit in 30 Years: More Questions of Debt Sustainability

noreply@blogger.com (www.JapanInvestor.com) — Wed, 25 Jan 2012 22:10:00 PST

In 2011, Japan reported its first trade deficit in 31 years, because of a) a hollowing-out of domestic production capacity as exporters move production offshore to cope with an ever-rising JPY against both USD and EUR, b) waning overseas demand due to the Euro crisis, c) serious interruptions in global supply chains with the March earthquake/tsunami/nuclear pollution crisis and serious flooding in Thailand, d) a surge in fossil fuel imports as Japan shut down all its nuclear plants following the March disaster and shifted to LNG and oil-fired power production.

Many economists see the trade deficit turning structural, as has happened long ago in the U.S. For example, Japan's trade in digital home electric appliances (consumer electronics) became a net import in 2010 and the deficit expanded to over JPY13 billion in 2011. For the July-September period (1 quarter) in 2011, overseas Japanese subsidiaries exported JPY2.2 trillion worth of goods to Japan. In terms of fossil fuel imports, LNG imports last year increased 12% YoY despite the surge in JPY, and crude oil trading above USD110/bbl would mean a trade deficit of JPY3.2 trillion for Japan.

So far, Japan has maintained a current balance of payments surplus through large net income inflows from overseas investments (government and private sector) in foreign bonds and dividend payments from overseas subsidiaries. The income account began to exceed the trade surplus in 2005 and has been expanding as the trade surplus has structurally declined. However, after the 2008 financial crisis, interest has significantly declined, meaning reduced income from overseas, by nearly 30% since the peak in 2007.

At some JPY14 trillion, the absolute size of the income surplus is still enough to offset the trade deficit, meaning Japan is still running a current balance of payments surplus. Once this income surplus is unable to cover a growing trade deficit however, the balance of payments will cease to be a source of confidence in Japan's nearly 20-year string as a net creditor nation. In addition, Japan's working population (15~64) is expected to shrink by over 20 million from over 80 million at present to just over 50 million by 2050.

Money flowing out through trade may erode investors' confidence that Japan's creditor status makes it a haven for investment (currently at JPY251.5 trillion, and with over USD1 trillion in forex reserves), complicating the government's efforts to manage the world's largest public debt. Policy makers have said the country's shrinking population means it will need to turn increasingly to foreign investors to buy its bonds. However, Bank of Japan Governor Masaaki Shirakawa is not convinced Japan is destined for a structural trade deficit, saying the trade deficit "won't become a firmly established trend" because it is driven by "temporary factors" such as increased energy demands after the earthquake.

The More JPY Reacts to Shift in Trade Balance, the Better for Japan's Exporters

JPY/USD did react to the news, weakening below the JPY78/USD level, whereas Toyota and big exporters consider the "ideal" exchange rate is JPY90/USD. The currency has soared 16% in the past two years, and has appreciated some 56% over five years. Thus a 30% depreciation in JPY versus USD, EUR would do wonders for the currently glum export picture.

Even so, with the population declining since 2006, and a trend rate of economic growth of 1% in coming years, Japanese policy makers urgently need to come to terms with Japan's ballooning public debt, which is expected to reach 985.4 trillion in March 2012, or over 200% of GDP. Consequently, the ruling Democratic Party of Japan (DPJ) wants Diet approval to raise the consumption tax to 8% percent in April 2014 and then to 10% in October 2015, from 5% percent now, but both opposition and DPJ politicians are resisting, and even this level of consumption tax hike is not seen as sufficient to address the debt problem.

The Daily Crux
Japan Economy Watch
FT Alphaville
Reuters

Japan to Miss Fiscal Target on Sales Tax Delay, Raising Possiblity of a Debt Downgrade

noreply@blogger.com (www.JapanInvestor.com) — Mon, 23 Jan 2012 22:49:00 PST

Japan will halve the ratio of its primary budget deficit to gross domestic product one year later than planned, said the government, after it pushed back the timing of a sales tax rise needed to repair public finances and offset rising welfare spending. The Cabinet Office now expects the ratio of the primary budget deficit to GDP to fall to 3.0% in fiscal 2016/17, slightly less than half of what it was in fiscal 2010/11

As the IMF and credit ratings agencies have long argued that Japan's sales tax needs to rise to 15% percent or even 20% to put a dent in Japan's ballooning debt, even CNBC commentators are speculating that a downgrade in Japan's sovereign debt is near, as current credit ratings are already on negative watch.

Reuters

Are Futures Traders Positioning For the Yen To Slide?

noreply@blogger.com (www.JapanInvestor.com) — Mon, 23 Jan 2012 22:40:00 PST

In Tokyo, the yen has been stuck in a tight range between the upper 76 level and the lower 77 range. vs USD. This is narrow compared with the 1 yen-plus daily swings the Japanese currency sometimes makes.

JPY on Upper End of Declining Flag

Early in the year, the number of put options was higher than call options. That's common among 1-month options, but there has also been a shift to put options in the 3-month contracts, and currency future traders are also reducing long positions on the Chicago Merc, suggesting it wouldn't take much for JPY to slide, which could accompany a break to the upside in US 10-year treasury yields, which already appears to have occurred.

US Treasury Yields Break to the Upside

Goldman Call to Tactically Short U.S. Treasuries is Essentially a Tactical Call to Buy Japanese Equities

noreply@blogger.com (www.JapanInvestor.com) — Mon, 23 Jan 2012 21:47:00 PST

According to Zero Hedge, Goldman's Francesco Garzarelli has officially told the firm's clients to go ahead and tactically short 10 Year Treasurys via March 2012 futures, with a 126-00 target, while openly buying Treasurys two days ahead of this week's FOMC statement--sound familiar?

Goldman reportedly sees a break to the upside in Treasury yields to 2.25%~2.50%, versus 2.04% now, as they see market economic growth expectations de-linking from bond yields at present, with bond yields lagging. .

Gloom and Doom Marc Faber of course has consistently been telling people to avoid sovereign bonds all along, but "we (he) don't (doesn't) know if (it will be in) 3 years, or 5 years, or 10 years, but one day there will be a reset, and everything will be started anew" i.e., the debt decks will be cleared.

If, and only if, US bonds yields are due for a significant up-tick on greatly improved investor economic growth expectations, Japanese equities are equally do for a significant rally., as (1) they have woefully lagged the S&P 500 rally since October of last year and (2) there is an historically high correlation between 10-year US bond yields and the Nikkei 225.

Goldman Says its Time to Tactically Short U.S. Treasuries

IMF Chief Lagarde: World Economy Risks Depression-Era Collapse In Demand

noreply@blogger.com (www.JapanInvestor.com) — Mon, 23 Jan 2012 16:27:00 PST

Japan's Nikkei.com is reporting on remarks made by IMF MD Christine Lagarde to the German Council of Foreign Affairs in Berlin. The remarks of course are aimed at those reticent to contribute more to IMF funding, including the German Bundesbank, to erect a more robust firewall to prevent the Euro sovereign/banking crisis contagion from deteriorating into "a 1930s moment, in which inaction, insularity, and rigid ideology combine to cause a collapse in global demand," "A moment, ultimately, leading to a downward spiral that could engulf the entire world." She of course is referring to the infamous Minsky Moment, named after economist Hyman Minsky, who described as the phenomenon that occurs when over-indebted investors are forced to sell good assets to pay back their loans, causing sharp declines in financial markets and jumps in demand for cash, i.e., a major sell-off precipitous collapse in market-clearing asset prices and a sharp drying-up of market liquidity.

In 2011, Lagarde said "policymakers let an old wound fester, and in doing so made the situation worse."Insolvency in (Italy and Spain) "would have disastrous implications for systemic stability," she said. Her solution is, "adding substantial real resources to what is currently available by folding the European Financial Stability Fund into the European Stability Mechanism, increasing the size of the ESM, and identifying a clear and credible timetable for making it operational," followed by more fiscal integration in Euroland.

Germany and some other northern European nations have been resistant to bulking up the public emergency fund, fearing it may prevent further fiscal belt-tightening in the weak Mediterranean economies. There's also political resistance to paying more for the bailouts than already doled out.

Lagarde is seeking to boost the IMF's lending resources by more than $500 billion to a reserve pool well over $1 trillion, including roughly $200 billion promised by Europe, as the crisis is already weighing on global growth. The IMF is lowering its growth forecasts for most parts of the world, even in the emerging markets that have helped drive economic expansion such as Asia and Latin America.

Global GDP Forecasts Continue to Be Revised Downward, While Investors are Chasing Economically Sensitive Stocks

noreply@blogger.com (www.JapanInvestor.com) — Thu, 19 Jan 2012 22:49:00 PST

Seeing the sharp deterioration in the Euro sovereign/banking crisis from mid-2011 onward, the world’s central banks moved to intervene by boosting their USD swap lines. The most recent FRB data show that these swap lines have now exceeded USD100 billion for the first time. At the same time, the ECB in December began offering Euroland banks low interest 3-year loans, and the enthusiastic take-up, as well as the favorable impact this had on weaker sovereign bond yields (Italy and Spain), gave global equity markets a good push in the right (positive) direction.

As a result, 2012 has begun on a much more optimistic note than 2011 ended. The BoA monthly survey of global fund managers shows that only 3% now expect renewed global recession in 2012, a substantial improvement from the last couple of months. Some 56% believe that the U.S. market offers the best corporate profit growth, while some 70% are bearish on corporate profit growth prospects for Euroland. As a result, some 28% are overweight U.S. stocks while the consensus is heavily underweight Euro stocks.

Japan’s Nikkei 225 on the other hand dropped below the March 2011 selloff lows to levels not seen since 2003. A big reason for this was selling by mainly U.S. index funds who had heavily bought Japanese stocks during the March sell-off.

As a result, Japanese equities have significantly lagged US equities in the recovery from November 2011 lows, and the Nikkei 225 currently looks capable of rebounding only to around 9,000 to 9,500 over the next couple of months. In 2011, Japanese equity performance was worse than the U.S., but better than Euroland and the emerging markets.

Currently, Japan’s benchmark stock indices are selling near break-up values, 2012 corporate profits are seen recovering some 20%, dividend yields at 2.5% are higher than the S&P 500, JPY is strong, as is Japan’s corporate balance sheets, as there is little corporate debt and lots of freely available cash, which Japanese companies are beginning to deploy. Debt in the private sector has fallen to a 24-year low, and Japanese M&A targeting foreign firms is proceeding at a record pace.

The big concern of foreign investors is Japan’s heavy public debt burden, given the events in Euroland, while domestic investors are more focused on the continued new highs JPY is hitting against EUR. Further, while Japan’s economy as of mid-2011 was widely expected to grow over 2% in 2012, the concensus growth number continues to be trimmed, to more like 1.6%~1.8% growth. The disconnect is that investors have been chasing economically-sensitive sectors over the past month, including a) global basic materials (MSCI-base, +8.6%), b) Topix construction (+7.9%), c) Topix machinery (+7.9%), d) Topix mining (+7.7%), e) Topix transportation equipment (+7.6%) and d) Global emerging markets (+7.3%), even as 2012 Japan GDP as well as global GDP growth numbers continue to be revised down by the World Bank, the IMF and other international organizations. From this movement it would appear that stock prices were already discounting a bleaker scenario that is incorporated even in the revised GDP forecast numbers.

Source: Tokyo Stock Exchange, MSCI

Short Cover in Euroland Banks

noreply@blogger.com (www.JapanInvestor.com) — Thu, 19 Jan 2012 21:33:00 PST

The Stoxx Euro 600 Index is now at a five-month high as Spain and France sold bonds at lower yields.National benchmark indexes are reviving in all of Europe's 18 western markets, except Iceland. Brothers now say market prices still underestimate the potential impact of the European Central Bank's support for banks to reduce systemic risk, with the ECB expected to offer a second round of 3-year low interest rate loans to Eurobanks at the end of February.

Speculators previously heavily pounding the Euroland bank stocks ever lower have seen enough of the impact on sovereign yields from ECB loan operations and the movement by the IMF to boost its coffers to help to convince them they need to cover their shorts for now.

Bloomberg

IMF Also Slashes its Forecast for 2012 Global Growth

noreply@blogger.com (www.JapanInvestor.com) — Thu, 19 Jan 2012 21:06:00 PST

Reuters and other media agencies are quoting a leaked World Economic Outlook from the IMF that shows a downgrade in its global growth forecast to 3.3% from an original 4.1% last September.
Fiscal austerity measures are expected to reduce Italy's GDP by 2.2% and Spain's by 1.7% as banks curtail lending, playing havoc with debt dynamics. This downward revision sees Germany growing by a mere 0.3% (2.0% prev), France +0.2% (+1.7% prev). As a result, the Eurozone economy as a whole is expected to shrink 0.5% versus a prior growth forecast of 1.1%, which is more bearish than the World Bank forecast released last week.

The new forecasts explain why the IMF is requesting $600 billion of more funding. As Greece haggles with its creditors about forcing private bond holders to take a big haircut without triggering CDS (credit default swaps), Portugal is next in line, as borrowing costs surge to record highs, or over 14%. Private sector forecasters say Portugal's economy will contract by a further 5.8% this year and by 3.7% in 2013, a far sharper decline than official forecasts, and making the peak-to-trough collapse around 13%, i.e., a full-fledged depression. While Portugal's public debt of 113pc of GDP is lower than Greece's, the private sector has much larger debts and the country's total debt-load is higher at 360pc of GDP - much of it external debt.

Telegraph
Telegraph 2

Stocks for the Long-Term, Like, uh, 22 Seconds

noreply@blogger.com (www.JapanInvestor.com) — Wed, 18 Jan 2012 23:01:00 PST

Textbooks like "Stocks for the Long Run" by Wharton Professor Jeremy Siegel exhort the virtues of investors holding stocks for the long run, while bonds have outperformed stocks now for around 40 years. But an OECD study of major pension funds, insurance companies, mutual funds and sovereign wealth fund institutional holdings by stock exchange shows a sharp decline in the average holding period, from over 5 years ~ over 2 years to much less than a year in essentially all major exchanges.

But according to Michael Hudson, a former Wall Street economist at Chase Manhattan Bank who also helped establish the world’s first sovereign debt fund recently said: "Take any stock in the United States. The average time in which you hold a stock is – it's gone up from 20 seconds to 22 seconds in the last year. Thats because algorithmic supercomputer-based high-frequency trading now accounts for about 70% of all trades, giving us good stuff like "flash" crashes.

Source: OECD , based on institutional investor holdings.

Telegraph

Greece: No Matter What You Call It It's Still a Default

noreply@blogger.com (www.JapanInvestor.com) — Wed, 18 Jan 2012 15:08:00 PST

THe whole Greek saga thing is getting boring. Everyone one knows the country will default, but are haggling over what to call it and whether or not "it" is considered a "credit event" or not. A credit event would trigger payouts on some$70.8 billion gross and $2.2 billion net of credit default swaps, but that is the International Swaps and Derivatives Association's (ISDA) call,while the rating agencies are splitting hairs with semantics, trying to make a distinction between "selective" or "restricted" default.

According to Fitch's lead analyst for Greece, Paul Rawkins "It would be a default regardless of the size of the NPV (net present value) loss,"---in other words, a default is a default, so lets get on with it, already.

Reuters

World Bank: Developing Economies Need to “Prepare for the Worst”

noreply@blogger.com (www.JapanInvestor.com) — Tue, 17 Jan 2012 22:00:00 PST

The World Bank sees continued risk for the European turmoil to turn into a global financial crisis reminiscent of 2008. Euro-area industrial production declined for a third straight month in November, a report last week showed, adding to signs the economy failed to expand in the fourth quarter as leaders struggled to quell the region’s fiscal crisis. The institution has slashed is forecast for world growth to 2.5 percent from a June estimate of 3.6 percent. The Bank sees the euro area contracting 0.3 percent in 2012, compared with a previous estimate of 1.8 percent growth. Other instituions are more bearish, seeing a 1%~2% contraction in Euroland.

The U.S. outlook was cut to an expansion of 2.2 percent from 2.9 percent, while Japan is no longer expected to grow above 2% in 2012. Emerging markets are also feeling the pinch of Euroland turmoil. In the second half of 2011, gross capital flows to these countries fell to 55 percent of the level in the year-earlier period. Emerging markets are more vulnerable than in 2008 to a renewed global crisis because rich nations wouldn’t have the fiscal resources they had back then to support their economies,

The Bank expects China's growth slow to 8.4 percent this year, the same as an interim revised projection released in November. India's forecast has been cut 1.9 points to 6.5% growth.

Rueters: China Harbringer of Global Slowdown?
Europe Threatens Emerging Markets

Martin Fieldstein: How the EU is Trying to Create a Depression

noreply@blogger.com (www.JapanInvestor.com) — Tue, 17 Jan 2012 18:55:00 PST

Feldstein believes European political leaders may be about to agree to a fiscal plan which, if implemented, could push Europe into a major depression.

The European Union’s summit in Brussels in early December agreed in principle to limit future fiscal deficits by seeking constitutional changes in their countries that would ensure balanced budgets. They agreed to cap annual “structural” budget deficits at 0.5% of GDP, with penalties imposed on countries whose total fiscal deficits exceeded 3% of GDP – a limit that would include both structural and cyclical deficits, thus effectively limiting cyclical deficits to 3% of GDP.

The most frightening development in Feldman's eyes is a formal complaint by the European Central Bank that the proposed rules are not tough enough. Jorg Asmussen, a key member of the ECB’s executive board, wrote to the negotiators that countries should be allowed to exceed the 0.5%-of-GDP limit for deficits only in times of “natural catastrophes and serious emergency situations” outside the control of governments. If implemented, Feldstein sees this proposal producing very high unemployment rates and no route to recovery – in short, a depression.

However, if the EU's track record is any indication, this tough talk on budgets will soon be violated in practice, just as the old Stability and Growth Pact was abandoned when France and Germany defied its rules and faced no penalties.

Project Syndicate

Marc Faber Sees WWIII in Five Years, Was Not Laughed Out of the Barron's Round Table

noreply@blogger.com (www.JapanInvestor.com) — Tue, 17 Jan 2012 18:46:00 PST

When Gloom, Boom and Doom report publisher Marc Faber told a gathering of fellow investment gurus at Barron's 2012 Roundtable that WWIII would occur in the next five years, he wasn't laughed out of the room by his peers. Said Faber, "World War III will occur in the next five years. That means the Middle East will blow up. New regimes there will be less Western-friendly. The West has also figured out it can’t contain China, which is rising rapidly and will have more military and naval power in Southeast Asia. The only way for the West to contain China is to control the oil tap in the Middle East."

Faber first urged his subscribers to being making preparations for worst case scenarios, advising those with the means to do it to leave urban areas and seek safety in rural, country areas--preferrably farms, and be prepared to defend that land if the worst happens.

SHTFplan.com
Daily Crux

Outdated Biz Models Hobble Japan Manufacturers

noreply@blogger.com (www.JapanInvestor.com) — Tue, 17 Jan 2012 18:33:00 PST

A January 17 article in Nikkei.com talks about the outmoded business models of Japan's faded "best and brightest" companies.

In electronics, the example is Apple (AAPL) compared to Sony (SNE) and Panasonic (PC). Apple as everyone knows is very cash rich, sitting on $76 billion in cash reserves, nearly as large as the U.S. government's cash balance! Apple has relentlessly worked to improve its Cash Conversion Cycle (CCC), by using its ingenious products to sign contracts with carriers to charge sales proceeds in advance. While outsourcing production to Taiwanese firms, it keeps close tabs on all processes--product development, manufacturing, procurement, distribution and consumption patterns. As a result, its CCC is minus 20, meaning investments in the iPhone and iPad are already paid for 20 days before they are manufactured. Conversely, the CCC for Sony and Panasonic is about 40 days.

Fourin, a market research firm in Nagoya, estimates the global market share of Japanese car makers fell in 2011 for the third straight year, while South Korea's Hyundai Motor recorded the fastest increase in market share. A senior executive at Hyundai boasts, "the Japanese 'kanban' method is no longer a threat," The just-in-time manufacturing process, the innovation of Toyota Motor (7203.T) widely contributed to enhancing the competitiveness of Japanese cars until the 2000s. But the edge has since faded with the diffusion of IT. Foreign carmakers can now manage production just as efficiently as the kanban method, making just-in-time a mere commodity. Hyundai uses IT to monitor production at its factories worldwide from its key operation site in Hwaseong, South Korea. When it finds a flaw with a certain process, it instructs the relevant facilities and fixes the problem on the spot. It has built a succession of fully automated plants with large output capacities, and the company spares no effort to grow sales, plowing huge amounts of money into promotion and advertising.

Further, U.S. and European market research firms now rank Hyundai alongside Japanese brands in terms of quality, and Hyundai has made huge progress in improving customer satisfaction, now leading Japanese rivals in various surveys. In Japan, individual production sites often wield strong authority, because they have spearheaded efforts to improve efficiency and have made independent efforts to optimize production. In an era of intense global competition, however, companies must seek to adopt a holistic approach to build up their global competitiveness.

Swiss Franc Way Over-Valued, But Japanese Yen Actually Undervalued

noreply@blogger.com (www.JapanInvestor.com) — Tue, 17 Jan 2012 15:31:00 PST

The Economist's newest Big Mac index shows that Switzerland, Norway and Sweden have the most over-valued currencies, while the other haven, jPY is actually undervalued on this metric.

Pragmatic Capitalism