A reader recentlyasked me some questions on the foreclosed property market in Japan.
I want to ask questions – but first I want people to buy the book. There are several reasons:
1. I invested 3-4 months into each book, so it would be nice to get some reward/return for my efforts
2. People have a habit of asking questions which are answered in the book – if only they bought it and read it before asking me.
This particular reader did however ask a question which I would like to offer an update. He is an Australian, so it relates to the strength of the $A against the Yen.
I would suggest that my forecast in the book remains basically the same, though there is one factor which will have an impact since I revised the book (2nd edition) in November 2008. That issue is the recent decision by the Chinese government to buy and stockpile commodities. Relatively stronger commodity prices, plus capital developments like LNG terminals (Gladstone & Far North) will likely result in stronger than otherwise capital inflows into Australia. I discussed this in my forex blog, however the decision by the Chinese government to buy and stockpile commodities is new, and unprecedented for the Chinese.
Understand that the Japanese government actually stockpiles strategic commodities for emergency provisions, but in the case of the Chinese, they are doing it because they fear an erosion of the USD which they were inclined to hold by way of US treasuries before. I did expect them to buy gold, but in hindsight, commodities makes more sense. The implication is that commodity price cycle will be shallower and longer. By implication we can expect the AUD currency against the USD to be stronger than otherwise, but the trough to be wider; though of course that depends on how China manages the commodities inventory. The implications for the AUD-JPY are basically the same, as the AUD is closely linked to global economic growth.
You might ask – will other governments follow the Chinese action and buy commodities? I could envisage some countries following suit, e.g. Vietnam, but not so many because of the costs associated with doing it. It’s cheaper to hold treasuries for most countries. China is different because it probably has a lot of spare warehousing, not to mention cheap land in rural areas. I would expect some govt officials to pilfer some of these reserves. Great recipe for corruption.
Japan remains a great place to buy foreclosed property. Some readers are buying inner city properties. I personally would wait a little longer before buying in central city areas. It makes more sense to buy in rural or suburban areas since these areas never had the price rises experienced in the city. Some of you wouldn't lower yourself to live outside Tokyo-23, in which case it makes more sense to buy an investment property in outer areas, and rent it or live in it another 6-12 months. The Japanese economy is contracting faster than most, so incomes are going to fall. In the city asset prices will as well. Some of you are excited...I know the feeling. But good judgement demands buying when things are worst. People are not feeling any pain yet, in part because of the lagging effects, and in part because of the central bank stimulus. The lower interest rates will mean nothing for years. That is because in the short term banks won't be lending, and in the long term because there will be inflation keeping interest rates higher.
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Andrew Sheldon www.sheldonthinks.com
I want to ask questions – but first I want people to buy the book. There are several reasons:
1. I invested 3-4 months into each book, so it would be nice to get some reward/return for my efforts
2. People have a habit of asking questions which are answered in the book – if only they bought it and read it before asking me.
This particular reader did however ask a question which I would like to offer an update. He is an Australian, so it relates to the strength of the $A against the Yen.
I would suggest that my forecast in the book remains basically the same, though there is one factor which will have an impact since I revised the book (2nd edition) in November 2008. That issue is the recent decision by the Chinese government to buy and stockpile commodities. Relatively stronger commodity prices, plus capital developments like LNG terminals (Gladstone & Far North) will likely result in stronger than otherwise capital inflows into Australia. I discussed this in my forex blog, however the decision by the Chinese government to buy and stockpile commodities is new, and unprecedented for the Chinese.
Understand that the Japanese government actually stockpiles strategic commodities for emergency provisions, but in the case of the Chinese, they are doing it because they fear an erosion of the USD which they were inclined to hold by way of US treasuries before. I did expect them to buy gold, but in hindsight, commodities makes more sense. The implication is that commodity price cycle will be shallower and longer. By implication we can expect the AUD currency against the USD to be stronger than otherwise, but the trough to be wider; though of course that depends on how China manages the commodities inventory. The implications for the AUD-JPY are basically the same, as the AUD is closely linked to global economic growth.
You might ask – will other governments follow the Chinese action and buy commodities? I could envisage some countries following suit, e.g. Vietnam, but not so many because of the costs associated with doing it. It’s cheaper to hold treasuries for most countries. China is different because it probably has a lot of spare warehousing, not to mention cheap land in rural areas. I would expect some govt officials to pilfer some of these reserves. Great recipe for corruption.
Japan remains a great place to buy foreclosed property. Some readers are buying inner city properties. I personally would wait a little longer before buying in central city areas. It makes more sense to buy in rural or suburban areas since these areas never had the price rises experienced in the city. Some of you wouldn't lower yourself to live outside Tokyo-23, in which case it makes more sense to buy an investment property in outer areas, and rent it or live in it another 6-12 months. The Japanese economy is contracting faster than most, so incomes are going to fall. In the city asset prices will as well. Some of you are excited...I know the feeling. But good judgement demands buying when things are worst. People are not feeling any pain yet, in part because of the lagging effects, and in part because of the central bank stimulus. The lower interest rates will mean nothing for years. That is because in the short term banks won't be lending, and in the long term because there will be inflation keeping interest rates higher.
-----------------------------------------------
Andrew Sheldon www.sheldonthinks.com
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