|
PureBytes Links
Trading Reference Links
|
I was teaching derivatives on and off in Tokyo before the bubble burst
and the circumstances were vastly different than in the US.
First valuations were high ... no question. ALL valuations were high it
was virtually impossible to find a down stock. In the US a ton of
issues are down so there is a place for money to flow to when some one
wants to exit. There were no groups to rotate to in the Japanese
market.
Second there were no interest rates to buy. Yields were, and still are,
virtually nothing. Again rotating from stocks to bonds made no sense.
Third ... and still a big issue in Japan is that no market existing for
securitized debt securities. A big issue as to why the saving rate is
so high. There was simply no place to put money ( and as a byproduct a
very small mortgage market.. virtually no securitized lending...... the
only place to get leverage was in the stock market).
Lastly....no derivative market. No way to manage risk or transfer it.
Remember all the Nikkei Warrants ..... non were issued (except in
Europe) by Japanese firms in the first two runs. The reason we were
over there was trying to get the TSE into the listed options business.
Osaka had some trading but in an index that was a bad fit.
In other words when it went down there was nowhere to go. A relatively
weak (their perception ) yen meant going offshore was not a good idea.
Jpilleafe@xxxxxxx wrote:
> Japanese investors at the end of their market's
> bull run in 1989 were in the same boat as US
> investors are now....needed the money for retirement
> in 20-25 yrs....were averse to bonds,....committed to
> equities as the asset class for long term appreciation,..etc.
>
> In particular the Japanese were regarded as fervant
> "buy and holders"...loathe to sell no mater what.
> Yet when the market hit 20% down from the highs...
> the sellers materialized.
>
> A key tennent of Technical Analysis is that
> "Market Action is Repetitive" and certain patterns
> appear from time to time,...reflecting fear and greed
> at extremes. I believe that human nature (psychology)
> reacts to similar situations in consistent ways,...mainly...
> PEOPLE ACT IN THE SAME MANNER AS THEY
> HAVE IN THE PAST.
>
> It is likely in my mind that US Baby-Boomers (just like Japanese
> investors of the late 1980's) will bail when their pain threshold is
> reached,..somewhere around down 20-30% from the highs. It is
> the capitulation of these "longer term,...buy and hold" investors
> that distinguishes a cyclical correction from a secular bear market.
>
> Regards, JIM Pilliod jpilleafe@xxxxxxx
|