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Japans’s Scary Lesson On Slashing Interest Rates

perrymperrym3 posts since
Jan 26, 2013
Rep Points: 14
1. Friday, April 26, 2013 - 5:56 PM
Great article, thanks!

When Fed. began to reduce interest rate to "save" the U.S. economy, people stated that it was very different from Japan's approach.  I forgot about all the nice and concrete arguments for that.  But the economical trend seems to be exactly like Japan's now.

The real issue is what should we savers do, if anything.  My thought is to take any measure which can benefit from the near-zero interest rate.  For example, refinance a mortgage, get a low-rate HELOC.  On the savings side, search for the highest rate products, like CDs, bonds, RCAs.  Meanwhile, live within one's means and live frugally.  I fully agree with the opinion of the article, that we will be in this extremely-low interest rate climate for a long time.  Might as well enjoy it and take advantage of it.

Just my humble opinion.
11
51hh51hh1,462 posts since
Jan 16, 2010
Rep Points: 6,352
2. Saturday, April 27, 2013 - 8:55 AM
.

Dear Perryn,

Speaking of Japan, perhaps there is another lesson to be learned by the proponents of those who believe in "dollar-cost-average" where equal amount of money is put into a broad-based equity index and it is believed that in the "end"  such a series of investment will result into a tidy profit.

Link below shows the progress (!) of Japan's Nikkei 225 Equity Index from 1995 till date. 

http://finance.yahoo.com/q/bc?s=^N225&t=my&l=off&z=l&q=l&c=

Imagine an investor who is putting even amount of money each month into a mutual fund based on Nikkei 225.  Questions that come to mind are:

1) Is such an investor be at break-even after nearly 30 years of investing?  (Nope!)
2) It is proposed that in the end, the investor will have a tidy profit, ... so where is this end?  (Nowhere in sight!)

Now a (sort of) comparable chart that shows the progress of US's S&P 500 Index.

http://finance.yahoo.com/q/bc?s=^GSPC+Basic+Chart&t=my

YES. Using this chart we can easily conclude that the "dollar-cost-average" would have worked nicely since 1970 for a US investor investing in S&P 500 based fund and sort of nicely since 1995.

---


Maybe ... just maybe ... is it possible to draw another conclusion, that Japan and US are sufficiently different that one's comparison for Equity Market results into different conclusion, therefore we need to take a long pause, think hard and wonder should we teach any local financial/monetary lessons obtained in Japan to anyone in the USA?  To anyone in the Euro-Union (nations that use Euro)?  To anyone in rest of the world? 

Or is it preferable to merely go over the Japanese curriculum out of academic curiosity, and not import any of it within the USA?

Yours Truly,
- Anon
2
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
3. Sunday, April 28, 2013 - 6:41 AM
2
ShorebreakShorebreak2,380 posts since
Apr 6, 2010
Rep Points: 12,706
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