Dearest readers, let me jump right in. The way things are going in EU, USA and Canada (at the very least), we need to talk about Japan, its economic crash and the lost decade it had. We need to know what happened and what to do if that were to happen here.
While academics still debate whether the lost decade in Japanese economy was really lost or not so lost or not lost at all, here are the current quick facts based on Investopedia:
So, what would we do here in North America if this happened to us? Well, things get interesting. We could see rent and real estate price increases stagnate. Then, we could see bonds, GIC's and good old savings accounts give us good enough of a return so we do not have to invest in the markets. Finally, if we experience an innovation-fueled deflation in car ownership, healthcare and energy the same way we did in the tech sectors with our dollars getting us more powerful and useful devices for less money, life could be ok-ish. But wait, what about the stock market- you might ask. It may become impossible to safely invest for the long term. While that could end up being the case, do not think for a second that the Tokyo Stock Exchange, in a country that had an economic meltdown and a lost decade, is dead quiet; it is quite the opposite.
Have you ever heard of Takashi Kotegawa, Japan's famous and so called bedroom trader (he traded stocks from the comfort of his home for at least a part of his career)? Takashi traded in the early 2000's and reportedly turned his $13,600 trading account into 153 million dollars! In Japan! At the tail end of the lost decade (roughly). Feel free to do your own research and look into theories of what strategies he used to make his fortune, whether those would work today and so on. The keyword here is day trading (swing trading being interesting as well). So, a faltering economy can still have a lively stock market where people can trade momentum, swings, news, short squeezes and so on and supplement their income or make their fortune full-time. Not easy, but certainly not impossible either.
Next, as possibly the cutest stock market student you know, I went and took this screenshot of my stock screen of top percentage gainers on the Tokyo Stock Exchange today-ish.
While academics still debate whether the lost decade in Japanese economy was really lost or not so lost or not lost at all, here are the current quick facts based on Investopedia:
- Japan's "Lost Decade" was a period that lasted from about 1991 to 2001 that saw a significant slowdown in Japan's previously bustling economy.
- The economic slowdown was caused, in part by the Bank of Japan (BOJ) hiking interest rates to cool down the real estate market.
- Equity values plunged 60% from late 1989 to August 1992,2 while land values dropped throughout the 1990s, falling an incredible 70% by 2001.
So, what would we do here in North America if this happened to us? Well, things get interesting. We could see rent and real estate price increases stagnate. Then, we could see bonds, GIC's and good old savings accounts give us good enough of a return so we do not have to invest in the markets. Finally, if we experience an innovation-fueled deflation in car ownership, healthcare and energy the same way we did in the tech sectors with our dollars getting us more powerful and useful devices for less money, life could be ok-ish. But wait, what about the stock market- you might ask. It may become impossible to safely invest for the long term. While that could end up being the case, do not think for a second that the Tokyo Stock Exchange, in a country that had an economic meltdown and a lost decade, is dead quiet; it is quite the opposite.
Have you ever heard of Takashi Kotegawa, Japan's famous and so called bedroom trader (he traded stocks from the comfort of his home for at least a part of his career)? Takashi traded in the early 2000's and reportedly turned his $13,600 trading account into 153 million dollars! In Japan! At the tail end of the lost decade (roughly). Feel free to do your own research and look into theories of what strategies he used to make his fortune, whether those would work today and so on. The keyword here is day trading (swing trading being interesting as well). So, a faltering economy can still have a lively stock market where people can trade momentum, swings, news, short squeezes and so on and supplement their income or make their fortune full-time. Not easy, but certainly not impossible either.
Next, as possibly the cutest stock market student you know, I went and took this screenshot of my stock screen of top percentage gainers on the Tokyo Stock Exchange today-ish.
First, let me say that the Tokyo Stock Exchange has a Toronto Stock Exchange feel to it. There is technically no pre-market or post-market, a daily volume of just 1 million or a few hundred thousand shares is actually not too little, and due to a lack of pre-market it seems that strategies like gap and go or gap and crap could work well on there. Finally, I selected stocks that are roughly in the $2-$25 range which is favored by many short term traders. What you see here are some very healthy percentage gains in this price range, definitely enough juice to be worth the squeeze. :) I do not know about you, but this gives me hope that our markets will be at least good for short term trading even if we suffer a lost decade.
So, what should we really fear? Hmmm, to me it seems like, as long as we can use the markets and find other ways to make enough money to live and save for retirement, we stay healthy and occupationally flexible, we will be ok. The only thing that would mess us up is sustained high inflation over a long term and/or USD and CAD using international value, status and trust. If that were to happen, what would be the point of becoming a short term trading millionaire anyways? :p
There we have it, dearest readers. Thoughts, comments?
So, what should we really fear? Hmmm, to me it seems like, as long as we can use the markets and find other ways to make enough money to live and save for retirement, we stay healthy and occupationally flexible, we will be ok. The only thing that would mess us up is sustained high inflation over a long term and/or USD and CAD using international value, status and trust. If that were to happen, what would be the point of becoming a short term trading millionaire anyways? :p
There we have it, dearest readers. Thoughts, comments?