It seems like everybody in this thread is saying "No duh, invest in Japan right now!"
The assumption is that the market will turn around, and anybody who buys into Japanese companies stands to make a lot of money. If this is the case, then why are the prices going down at all? Are other investors really that ignorant?
If you are already invested in Japanese equities the "safe" play is to try to take some cash off the table to defend against what could be a bleak revenue picture in the near future. If you are not yet in that market then there might be a long term play investing when these stocks are weak. Id assume most here who advocate buying are in this boat.
Both buying and selling may be the correct play depending on your current position.
You're correct in pointing out that we can only be buying if someone is willing to sell to us. However, one big factor is your time horizon. For average investors like ourselves, if you're investing for the long term / retirement, you generally know that it will recover, whether it's over 1 year, 2 years, or longer. It may go down further, but will it be in the same state 30 years from now? Probably not, so it's relatively safe to buy in at a "discount".
Contrast that to hedge funds, investment banks, and other investment groups that have investors to please and targets to hit in the immediate/short term. For them, their time horizon is shorter and 1) they need to free up cash and 2) they cannot take the risk of holding on because the economy is definitely impacted in the short term.
Happens so, so often. A great example (very YC suited!) is Apple's stock prices in January.
When Steve Jobs announced his medical leave just under two months ago, the Apple (AAPL) price opened the next day (Tuesday) down 5.44% on Friday's close price. The low point on Tuesday was 6.45% lower than Friday's close price.
While the price did go back up a bit that same day (the Tuesday close was only 2.25% lower than Friday's close price), it kept dropping for a few days. By the time the markets closed on Friday, AAPL's price was 326.72, down 6.24% in a week (compare that Friday close price to AAPL's lowest price on Tuesday, which was 326.00).
For some reason, investors were selling Apple stock because of fears over Jobs. This seemed ridiculous to me, and sure enough, in the (nearly) two months since then, the market has shown that I'm not alone in that view.
If you bought AAPL stock at that Friday closing price and sold right now, you'd be selling 8.21% higher than you bought. Even if you didn't time the buying quite as well, so didn't get it at such a low price, if you bought it at the opening price on Tuesday (the day after the Jobs announcement) you'd have made 7.30% profit, or if you bought it at the closing price on that same day and sold now, you would have made 3.79% profit.
So even with pretty shit timing on when to buy, just by having faith that Apple stock would bounce back, that's a very healthy rise in value over just two months.
The cause (I think) of the problem is two-fold. For starters, people are afraid that, if they buy back in too early, they will be too far ahead of the market and prices will continue to drop - obviously, they're hoping to be just a tiny bit quicker than the market, buying just before prices start going back up again quickly.
The second reason is basically the same, but with a different approach. Rather than wanting to avoid having your shares devalue immediately after buying them, it's a case of not wanting to buy back in too soon because, the lower the price you pay, the bigger the return once they have bounced back.
Another aspect is that people actually need cash in these sort of situations and sell liquid assets to get it, while others that need cash on hand are putting less in. So, the market may benefit a long term holder of securities, but people that do or might need the money soon can't afford the short term volatility.
It's easier to post a buy comment here than it is to post a buy order with your broker. I doubt many of these posters have actually put in a buy order of any substantial amount.
I think part of the assumption is that people tend to trade less than perfectly when they think a radioactive cloud might be heading their way.
Right now a lot of the losses are due to uncertainty, people are factoring in risks of the unknown, potential worst case scenarios etc. If you buy in expecting the market to go back up, you are essentially betting the situation won't end up as bad as feared right now.
I'm wondering the same thing. One estimate puts the number of houses destroyed at around 100k (http://www.msnbc.msn.com/id/42025882/ns/world_news-asia-paci...). Car ownership is around 1 car for every two people in Japan, no doubt more in rural areas. So 100,000 destroyed houses might mean 80k to 140k flooded cars. I'd guess that more than 50k extra cars are going to need to be produced in Japan to replace those that have been lost (which, though a relatively small proportion of the probably 1,000,000 cars made in Japan yearly, is nonetheless significant).
Another sad fact of this disaster is that it disproportionately affected the retired -- this too may well have consequences economically.
Economics is in part about people having productive stuff to do. If there was a work shortage in Japan before, I doubt there is now.
I think the general belief is that they are being irrationally over-pessimistic due to panic over the daiichi situation, and that this can be exploited by people whose distance affords them a more cool-headed approach.
The market as a whole may be rational, but individuals in the middle of a tense situation probably won't be.
A number of prices will be going down because of reduced dividend expectation. Companies that are about to make a big loss due to natural disasters are going to reduce dividends, so the shares are actually worth less than they were a week ago.
That said, the "efficient market hypothesis" of which you speak; that is, the idea that any and all future price rises and falls have already been factored in - is false.
Many investors _are_ ignorant. Many are stupid. Many are prone to panic. They are prone to everything that all other humans are prone to. Many are in fact big funds that have preset automated buying and selling positions and would happily buy and sell regardless of what else is going on.
As evidence, I point to every bubble and crash there has ever been.
"Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful."
You're pretty much saying you think markets are efficient. Some others are pretty much saying they think there is a predictable panic sell component in current prices (and likewise in other bad news events). Maybe the latter is often true. Actually I believe it is possible for someone to have sufficiently good judgement to consistently make money from market overreactions. In this case, I personally don't have a clue - there too many uncertainties for me with this one.
It depends on how bad the news really is, e.g. how damaged Japan's infrastructure actually is, as a whole. You need to judge this with facts, not on what other investors do, efficient market hypothesis notwithstanding.
FWIW, I don't know enough of the facts to make a decision. I do have a feeling that the Japanese people will rebound vigorously, as they did after WWII.
People behave irrationally during panics. Through a little bit of cleverness on my part and alot of luck I found myself sitting on cash when Lehman collapsed.
So faced with the prospect of fiscal apocalypse or (I had friends pulling money out of banks) the buying opportunity of the century, I bought a bunch of equities that were punished by the collapse, and made a bunch of money.
Just guessing but if you are doing short term trading isn't it better to sell if you think it can go down a bit more then buy at the absolute lowest price.
Time to start buying. Bet Buffet is taking a look at all those wonderful Japanese companies who moats are wide, have good fundamentals, and produce reasonable free-cash flow. Hope his "itchy trigger finger" found a few targets. My IRA could use a boost after the last few years.
I remember buffet saying in some interview that Japan makes great products and has a great economy but they don't make great companies, from the investor's perspective.
There's no better time to buy stocks than during a market panic. Japan is a wealthy country. The Japanese work ethic is unbeatable. Now is a great time to buy Japanese stocks.
How does one invest in the Nikkei 225 in the USA? I'm looking for an Exchange Traded Fund (ETF) type of deal. I see that there are a couple mutual funds (UJPIX) but I'm more interested in something on one of the US markets.
REMEMBER: This is probably not the best place to get investment advice. Everyone's got an opinion but it's different when you've got actual cash on the line.
Can someone share the best way to enter the stock market for someone who is completely clueless on stocks in general yet wanted to dabble in them for quite some time?
This is a tough bet. My first reaction was, "They are going to open up their wallets and spend like crazy to rebuild." Then I heard on the news that Japan runs a massive fiscal deficit and I thought, "Where are they going to get the money." When the market cools, it might be good to pick individual stocks (construction and pharma come to mind). Right now though, staying out of the broader market (index funds, etc.) might be prudent.
Disasters like this are, in theory, actually beneficial to economies--especially stagnant ones like Japan's. The capacity for immediate bonafide economic growth has been diminished but that doesn't mean that economic production will decline. There is now ample room to deploy all that surplus capital (humans, machinery, money) that was previously unproductive. The upper echelones of the financial sector will make a killing shorting and re-buying.
Only an economist can consider a theory like that for more than a few seconds and not laugh hysterically. As Tom Woods has said, following this logic, the best thing we could do for our economy is build a huge armada of amazing battle ships, have Japan do likewise, then float them to the middle of the pacific and, after evacuating them (surely, the loss of human life is not a necessary component in this economic model, is it?) blow them all up.
This will trigger deleveraging around the world. Specifically, this will impact the venture capital in silicon valley. We'll likely start to see some angel/vc investors start to panic and withdraw from the market, shutting down startups, etc.
Wait what? There was a massive deleveraging event a few years ago and I don't remember VCs being forced to withdraw money from startup accounts. How would they do that anyway? Once they invest the money the money belongs to the company they invested in. They might be forced to sell shares I guess but they can't just take someone's money.
[+] [-] blhack|15 years ago|reply
The assumption is that the market will turn around, and anybody who buys into Japanese companies stands to make a lot of money. If this is the case, then why are the prices going down at all? Are other investors really that ignorant?
[+] [-] mikeryan|15 years ago|reply
Both buying and selling may be the correct play depending on your current position.
[+] [-] akashs|15 years ago|reply
Contrast that to hedge funds, investment banks, and other investment groups that have investors to please and targets to hit in the immediate/short term. For them, their time horizon is shorter and 1) they need to free up cash and 2) they cannot take the risk of holding on because the economy is definitely impacted in the short term.
[+] [-] corin_|15 years ago|reply
When Steve Jobs announced his medical leave just under two months ago, the Apple (AAPL) price opened the next day (Tuesday) down 5.44% on Friday's close price. The low point on Tuesday was 6.45% lower than Friday's close price.
While the price did go back up a bit that same day (the Tuesday close was only 2.25% lower than Friday's close price), it kept dropping for a few days. By the time the markets closed on Friday, AAPL's price was 326.72, down 6.24% in a week (compare that Friday close price to AAPL's lowest price on Tuesday, which was 326.00).
For some reason, investors were selling Apple stock because of fears over Jobs. This seemed ridiculous to me, and sure enough, in the (nearly) two months since then, the market has shown that I'm not alone in that view.
If you bought AAPL stock at that Friday closing price and sold right now, you'd be selling 8.21% higher than you bought. Even if you didn't time the buying quite as well, so didn't get it at such a low price, if you bought it at the opening price on Tuesday (the day after the Jobs announcement) you'd have made 7.30% profit, or if you bought it at the closing price on that same day and sold now, you would have made 3.79% profit.
So even with pretty shit timing on when to buy, just by having faith that Apple stock would bounce back, that's a very healthy rise in value over just two months.
The cause (I think) of the problem is two-fold. For starters, people are afraid that, if they buy back in too early, they will be too far ahead of the market and prices will continue to drop - obviously, they're hoping to be just a tiny bit quicker than the market, buying just before prices start going back up again quickly.
The second reason is basically the same, but with a different approach. Rather than wanting to avoid having your shares devalue immediately after buying them, it's a case of not wanting to buy back in too soon because, the lower the price you pay, the bigger the return once they have bounced back.
[+] [-] mattmcknight|15 years ago|reply
[+] [-] MichaelApproved|15 years ago|reply
Many people who are levered don't have the capital to withstand this type of drop and get washed out causing further selling.
It's a chain reaction that eventually cools off. Let's hope their fuel rods do the same!
[+] [-] MichaelApproved|15 years ago|reply
[+] [-] AngryParsley|15 years ago|reply
I think the LessWrong post Markets are Anti-Inductive explains it well: http://lesswrong.com/lw/yv/markets_are_antiinductive/
[+] [-] jarek|15 years ago|reply
Right now a lot of the losses are due to uncertainty, people are factoring in risks of the unknown, potential worst case scenarios etc. If you buy in expecting the market to go back up, you are essentially betting the situation won't end up as bad as feared right now.
[+] [-] leot|15 years ago|reply
Another sad fact of this disaster is that it disproportionately affected the retired -- this too may well have consequences economically.
Economics is in part about people having productive stuff to do. If there was a work shortage in Japan before, I doubt there is now.
[+] [-] msbarnett|15 years ago|reply
The market as a whole may be rational, but individuals in the middle of a tense situation probably won't be.
[+] [-] EliRivers|15 years ago|reply
That said, the "efficient market hypothesis" of which you speak; that is, the idea that any and all future price rises and falls have already been factored in - is false.
Many investors _are_ ignorant. Many are stupid. Many are prone to panic. They are prone to everything that all other humans are prone to. Many are in fact big funds that have preset automated buying and selling positions and would happily buy and sell regardless of what else is going on.
As evidence, I point to every bubble and crash there has ever been.
[+] [-] MichaelApproved|15 years ago|reply
[+] [-] seanalltogether|15 years ago|reply
http://www.google.com//finance?chdnp=1&chdd=1&chds=1...
[+] [-] IdeaHamster|15 years ago|reply
-- Warren Buffett
[+] [-] HSO|15 years ago|reply
also, as others have pointed out, your circumstances may differ from others'.
[+] [-] math|15 years ago|reply
[+] [-] 6ren|15 years ago|reply
It depends on how bad the news really is, e.g. how damaged Japan's infrastructure actually is, as a whole. You need to judge this with facts, not on what other investors do, efficient market hypothesis notwithstanding.
FWIW, I don't know enough of the facts to make a decision. I do have a feeling that the Japanese people will rebound vigorously, as they did after WWII.
[+] [-] Duff|15 years ago|reply
So faced with the prospect of fiscal apocalypse or (I had friends pulling money out of banks) the buying opportunity of the century, I bought a bunch of equities that were punished by the collapse, and made a bunch of money.
[+] [-] rtaycher|15 years ago|reply
[+] [-] unknown|15 years ago|reply
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[+] [-] josh33|15 years ago|reply
[+] [-] wheaties|15 years ago|reply
[+] [-] travisp|15 years ago|reply
It's almost certain that Buffet would be actually analyzing these stocks rather than just jumping in because people may be being fearful.
[+] [-] netcan|15 years ago|reply
[+] [-] secretasiandan|15 years ago|reply
Can you explain why this is time to start buying?
If you can explain why people are selling so much so fast right now, that might help your argument.
[+] [-] awa|15 years ago|reply
[+] [-] unknown|15 years ago|reply
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[+] [-] citizenkeys|15 years ago|reply
[+] [-] mikebo|15 years ago|reply
http://www.fool.com/investing/international/2010/07/22/john-...
[+] [-] commanda|15 years ago|reply
http://adb.nikkei.co.jp/ad/logo/2008b/NikkeiWeekly080722-NNI...
[+] [-] alanpca|15 years ago|reply
[+] [-] steveplace|15 years ago|reply
[+] [-] elliottcarlson|15 years ago|reply
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[+] [-] pero|15 years ago|reply
Advanced reading on a parallel concept: http://www.irows.ucr.edu/conferences/globgis/papers/Arrighi.... The quoted and cited David Harvey piece (2007, albeit the condensed article veresion and not the full-length book) would have been a better reference however is apparently no longer online. This, though, is amazing: http://www.youtube.com/watch?v=qOP2V_np2c0
I believe Naomi Klein made a good buck on dumbing down and re-orienting the above hypothesis.
[+] [-] carsongross|15 years ago|reply
Rinse, wash, repeat. We're all rich!
[+] [-] orangecat|15 years ago|reply
In very bad theories, yes.
[+] [-] unknown|15 years ago|reply
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[+] [-] tansey|15 years ago|reply
[1] http://finance.yahoo.com/echarts?s=^N225+Interactive#chart2:...
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[+] [-] bradly|15 years ago|reply