If you look at the table below, you may wonder if the following observations are true :
M2(A) Central Bank Assets(B) Nominal GDP(C) (A)/(C) (A)/(B)
Japan (JPY) 807TR 140TR 468TR 5.76 1.72
China ($US) 13.5TR 4.5TR 7.1TR 3.00 1.90
US ($US) 9.7TR 2.9TR 15.1TR 3.34 0.64
1) No wonder Japan finds it hard to grow because it has already swollen money supply lingering.
2) No wonder China is slowing down. Even without global economic slowdown, China is already in the stage of reduced growth as its monetary expansion gets parallel with Japan's.
3) US looks healthier !?
Let me add to say that:
a) In 2011, 52% of global M2 growth came from China alone !!
b) US M2/GDP is low because US money supply is absorbed in other global currencies via foreign reserves.
c) What are missed out ? Each country's asset size and qulaity, and accrued debts in the future (pensions, social securities, healthcare). This should make China ahead of Japan and the US as the latter's democracies are unable to trim its own financial promises.
I am seeing another crisis spreading into Spain without doubt.
I have done some interesting comparisons of the country's woes with Japan's back in 1990.
1) Exposure to Real Estate
Japan : Bank lending lending to three sectors, construction, real estate, non-bank financial all have exposure to speculative land holding. I estimate they added up to 25% of land-related bank lending.
Spain : 50% bank lending to real estate !!
2) Non-financial Industry's Debt Level to GDP
Japan : In 1990, the ratio was 120%. Now it has reduced to 80%.
Spain : 200% !!
3) Bad Debt Write-offs
Japan : In 1990, Japanese banks lent out 460 trillion yen and from 3/1992 to 3/2001 they wrote off 65 trillion yen. My estimate is that Japanese banks should have seen their bad debts as large as 80 trillion yen or so in 1990.
Spain : BIS estimate of global exposure to Spain is $1 trillion, and my guess is that the organization under-estimated the figure so my estimate is $1.5 trillion with expected loss of $600-900 billion. Let's compare this figure to EU's trial to increase EMS power to $600 billion , and we will see that the rescue money won't be enough.
4) New Housing Loans
Japan : In 1989, loan peaked at 28 trillion yen (6.8% of GDP) and grew to 36 trillion yen (7.3% of GDP) thanks to government support,
Spain : In 2005 prior to the land price peak of 2007, 92 billion euro (9.7% to GDP) housing loan was extended.
There is not any uncertainty, buy Spanish crisis is due to come. Let's prepare for it.
Shin
Long time no see. I knew it would be hard to keep daily blogs.
Japanese media likes to pick who the Japanese executives who make more than 100 million yen ($120K) a year.
Personally I never share the same interest as theirs because it is simply not important.
However, I thought it would be interesting to point out SMF(2762).
The company pays its five directors 270 million yen. Since two of them are the founder and his son who controls 43.3% of the outstanding shares, I guess that they two must earn 100 million yen each. Plus 72 million yen bonus pool out of which some 40 million yen may go to the top two executives as well.
SMF ia a great small company so they are worth the compensations!
But relative to the overall Japanese executive payroll level, they are paid VERY handsomely.
Lastly if you are are equity investor, you should pay attention not to SMF's weakening "izakaya" segment but newly developed 1) Udon noodle, Rakugama Seimenjo, and 2) Beef bowl, Tokyo Chikara Meshi, as they are powerful enough to grow into 200 outlets each easily because they both are very tasty and priced reasonably.
Shin
For whatever reasons did not only TEPCO but also other electric power company stock prices fall sharply these days. Should the decline be justified ? Probably no.
Let's note:
1) There will be no fundamental changes in demand for electricity
2) Due to the industry-specific, cost add-on pricing system, electric power companies will be guaranteed stable profitability
3) Those other than TEPCO have declined to the price level of 1985
4) Expecting as high as 6% dividend yield given as I stated above stable profitability
5) My personal valuation sets fair value of Tohoku Electric Power (9506) 160% above the current price of 930 yen. I applied 3.5% as cash flow discount rate which may be controversial. But it was 2.33% implicit in justifying TEPCO valuation in the normal past so 3.5% is not off the point.
6) Newly emerged topic of separating power generation and transmission is absurd as it has nothing to do with the gist of the latest Fukushima nuclear reactor accident.
Among all, my temporary buy candidates are Chubu (9502) and Tohoku (9506). Buy them for easy profit.
Shin
I rate 7467 Hagiwara Electric as 4.3, which means its fair value is 4.3 times as high as its current stockprice of 660 yen.
The primary buy reason for Hagiwara is that it is one of the best choices to make your investment tuned into the long-term growth of semiconductors used for automobiles. I set my estimated growth rate of 8%.
Hagiwara saw its revenue grown from 2002's 41.9 bn yen to 2008's 74.8 bn yen at CAGR of 10.1%.
We now see sluggish sales recovery, which explains why Hagiwara lost 75% of its value over the past five years.
Why so ? It's because of the latest global credit crunch, and a more specific cause was Toyota's problem with Lexus in North America.
Hagiwara is not explicit in explaining of the importance of luxurious Toyota cars such as Lexus and Crown,but I guess that it may account as much as 40% of their car semiconductor business. Maybe the number is even higher if they have won Prius business which also uses a lot of semiconductors.
As I believe the following and therefore I see Hagawara should trade at a much higher price:
1) Use of semiconductors for cars in general is still on uptrend,
2) Toyota luxurious car segment is growing
3) No lesser percentage of semiconductors will be procured inside Japan as there is a stable business partner Renesas in Japan and high-end car design will stay in here so Hagiwara will keep helping Toyota group to custom design chips through Renesas.
I set my first-stage target value of Hagiwara at 1,400 yen where I rate it at 2.0, still a reasonably inexpensive price relative to auto related industry.
