What's dead now? Hmmm...
What's so dead it's beginning to stink? The only thing we can think of is Japanese stocks. Every time we mention them, dear readers write to ask if we've lost our mind. The Japanese are growing old. They are up against not just a retirement crisis; they face extinction. They are not just figuratively dead...but literally dead. The government is headed toward monster debts...with no way to finance them. Already, they borrow more than a dollar for every dollar of tax receipts. Besides, the Chinese work cheaper. And the Chinese have the same technology...and the same access to capital...and a much bigger market.
As if to prove that Japan is dead, Toyota seems to have fouled up its accelerator mechanism. According to press reports, some Toyota automobiles go faster and faster even when you tell them not to. Drivers do not like that kind of insubordination. Only vulture lawyers do. So Toyota has had to shut down its assembly lines in order to mitigate the damages. So investors took a whack at Toyota shares yesterday; they fell 9%.
Is it the end of the road for Toyota...and for Japan?
Probably not. But we wait to see what happens...just like everyone else.
Bill Bonner
for The Daily Reckoning Australia
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About the Author
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Comment by Fiscal Phil on 29 January 2010:
Dan,
Can you tell me how cashed up Japanese companies are.?
My issue is (having discussed this with a couple of people who lived in Japan for a decade) that the govt is in debt up to it's eyeballs but the Japanese people have a couple of gazzillion in savings BUT the Japanese public are notoriously thrifty when things are a bit unstable. You often here of people born in depression era Australia as being very thrifty, well depression era Australia was as soft as butter compared to post war Japan and the people born in the 20 years after WW2 WILL NOT SPEND.
I think the govt may have even spent a fair bit of money recently trying to get the Japanese consumer to "unlock" some of that spending power.
It also seems apparent that the major corporations in Japan, WILL NOT BORROW.
So the only money the companies will use to grow or survive to take advantage of the rest of the worlds lack of cash is THE CASH THEY ALREADY HAVE.
I agree that the Japanese may be well placed to take advantage of upcomming crise's (opportunities) but I have a concern that they are going to be to concerned with preserving capital to make any money.
Comment by Fiscal Phil on 29 January 2010:
Hit submit too quick.
But if the Japanes firms have a lot of cash to ride out the depression, it may be a case of last car company etc standing and they'll have the flexibility to build factories anywhere they please coz nobody else will be.
So if the Japanese do have the capital to stay afloat, I'll be chucking my super at them, just not yet though.
Comment by Dan on 29 January 2010:
The Chinese share market is looking like running out of steam. Maybe Japan will have the last laugh?
Comment by Fiscal Phil on 29 January 2010:
Sorry Dan, I meant to direct the question to Bill Bonner.
Comment by Greg Atkinson on 29 January 2010:
Japanese unemployment is down to 5.1%, exports are creeping back up and Japan Inc looks far from beat to me. When the Chinese economy slows (as it will) then I would rather have an economy like Japan's than Australia's.
In any case Japanese companies have hedged their bets fairly well and have been busy buying up stakes in companies in Australia during the GFC at bargain prices.
Anyway, it seems that the BHP share price was telling us something after all! http://www.shareswatch.com.au/blog/stockmarket/is-the-bhp-billiton-share-price-telling-us-something/
Comment by Pete on 29 January 2010:
Greg 29/01/'10: "I know most Australians like to believe that the nation escaped a recession because our economy is so well tuned or managed but the reality is we were lucky. If the nation had significant export focused manufacturing sector we would have felt much more economic pain. We simply avoided a recession because our economy lacks diversity."
Another view is that we have what is wanted, Greg. Some might say we're focussed on what we do well, but, as you and I know, that's BS. We simply have what others need, now. I wouldn't write China off, while writing Japan on. Agree that our manufacturing industries are undeveloped (and in the end, 2100, perhaps) this will catch us out. But realistically, how could our manufacturing industries ever compete with countries which have such incredibly low labour costs? As the Asian nations rise... and their labour costs rise... maybe Oz _might_ have a chance... . (Not all good news, as consumer items will _cost the earth_ in that scenario... .)
Niche manufacturing industries with strong patents seem to be doing OK in Oz... but I note more and more of these are moving manufacturing offshore. This isn't unique to Australia. Friends with very large manufacturing companies in Canada have moved all their action to China. It's simply about labour costs.
And how many iPads do you figure will be manufactured in the US?!!
Comment by Greg Atkinson on 29 January 2010:
Pete a lot of manufacturing is still done in Europe, the US and Japan so honestly I think the old "we can't compete" line is one we Aussies use to cover the fact we ain't good at it
In any case, if we can't manufacture then why don't we design products and have the stuff made in lower cost countries? Again I am afraid we come up short don't you think? Where is our Nokia, Intel, Toshiba, Siemens or even Ikea?
But heck, I still reckon we make some of the best beer around and our wines are pretty good too. Although I hear the beer is good in Canada..is that correct?
Comment by Dan on 30 January 2010:
If manufacturing in Australia were to be largely robotics based, then there is no labour cost component, really - only energy costs and attracting skilled staff to run the factories and maintain the machinery. There are so many opportunities for Oz which it hasn't taken up, such as developing our own silicon valley, etc.
Comment by Pete on 30 January 2010:
Points taken, Greg and Dan. Design the stuff here, outsource it; or use robotics. And yes, we compete with the best when it comes to beer and wine.
(The Canadian beer is just OK, Greg... doesn't compare with our own. Maybe I have a parochial palate.. .)
Comment by Greg Atkinson on 30 January 2010:
Pete, yep..that is the basically the Japan Inc. model - focus on design, quality and being as efficient as possible. I reckon we could also set up true technology hubs if we wanted and give companies tax breaks to locate there as opposed to our current tech zones which are basically admin centres. (I worked in one such area once)
As for the Toyota story a few interesting facts are that the faulty component was not manufactured in Japan and the problem has only happened with vehicles manufactured outside of Japan. A focus on growth ahead of quality is seen as the cause of the problem so it will be interesting how the affects other Japanese companies.
Anyway I am off again for a while. Cheers!