Wednesday, April 29, 2009
(Cont'd from above)...

Jim (cont'd):   

Yes, this one… the we are Japan bear representing the idea that the United States is going to turn the failed financial state of Japan… or go thru something similar to that countries lost decade… I say… bye-bye Smokey… bye-bye Yogi… bye-bye Boo-Boo… hey, bye-bye Gentle Ben… so long pandas, and polar bears… I am declaring today, today… this is the first annual we are not Japan day… and it is a great day for the bulls… every since the crisis started we have been dogged by arguments that the United States was repeating the Japanese experience in the 1990’s… and there are a lot of apparent similarities… thanks to a brutal downturn in real estate… the Japanese financial system collapsed and its banks hobbled along meaninglessly… zombie like… government supported zombies… for a decade of almost no economic growth… Japans Nikkie 225, that is the main index that measures performance of the Toyko’s stock exchange… it declined by 82% from its peak at 38958 December of 1989... to its trough of 6994 in October of 2008.

You can see why the we are Japan argument could be so frightening… it just looks so much like where we were a few months ago… and the specter of that massive decline is something that the bears have used to club the market lower… they have made the bulls look like salmon in one of those great videos of the bears going fishing in that river up in Alaska… but the fact is that the United States is very different from Japan… something that was confirmed by today’s, yes, Gross Domestic Product growth report… the headline plus at a 6.1% rate decline of an annual GDP… it was definitely worse than expected… and that looked positively Japanese… but that number is less important than its components… and they tell a much less negative story than you think.

Why was GDP shrinkage worse than expected… not because we are in a Japan like situation where economy has become zombified… but because of declines in inventory and government spending… lets think about this… you and me brainstorm… we know that the government will be spending a heck of a lot of money going forward… stimulus is really kicking in the second half of the year… so that is something that we really do not have to worry about… inventories… that is good news… as we have said over and over again when we have tried to describe inventory… it tells us that our businesses have done what is necessary to cut back… and boy have they cut back… recessions do not end until we clear out excess inventory… and now it looks like we could be getting close to the point where businesses are all restocking their inventories… we have seen it only in technology, some chemical… and the economy can grow… or at least not shrink again.

The best and least Japan like figure in the report was consumer spending… which increased at a 2.2% clip… and I do not just mean the clip that I am going to put in at the end of this segment, to be able to shoot more bears… we are still spending money… while Japan has been for a long time a nation of savers and misers… they never started spending over there… it looks like we never stopped here… and that is great for our economy… the fear and the hoarding that it produced in Japan… along with the insistence of propping up of all of the banks, even the ridiculously insolvent ones… is the toxic brew that we now know isn’t being sipped at the US bars… now even the bears now know that we are not in for a Japan style decade of no growth… so the bears are on the run… for fear of being gunned down by bulls, with better statistics, better arguments, and, of course, better fire arms… it is open season… thank heavens for the glorious second amendment… which clearly trumps the other nine.

The we are Japan argument was always bogus… even though it had a lot of adherence… particularly columnists and professors, those two great groups that have never made a nickel… the huge structural differences are just too great to ignore… the main difference is demographic… Japan’s economy could sit in neutral for years, because Japan’s population is stagnant… from 1980 to 2008 the population of Japan grew by just 9%… and it is projected to start decreasing in the not too distant future… the US, the same period our population grew by 34%… the fact that we have more and more people gives us more and more resources, more and more spending… and puts enormous pressure on our economy to grow… one of the reasons is their lower birth rate… but most of it has to do with their differences in immigration policy… our is generous net migration in the US, 4.31 of new immigrants for every 1000 members of the population… Japan had numbers near zero because their immigration policy is so restrictive.

It is not just the number of people, it is also how old they are… America average age 36... Japan 44... it is a country with far more senior citizens… that means lots and lots of retirees… people who are not producing anything for the economy to speak of… and are afraid to spend… we are a much younger country… our economy is not that dependent on exports… while Japan is almost totally export oriented… they are totally different situations… that is why industrial production shrank by 2.2% in the US in 2008... compared to worse George Constanza like shrinkage 3.2% in Japan… and there actually is something wrong with that… saying that we are going to have a zombie decade because it happened in Japan… is like all of those people who said that we should nationalize the banks because it worked in Sweden… which is about the size of Mississippi.

The nationalization bear has already had its head blown off… and we are not Japan is being hunted to extinction even as we speak… in this country, unlike in Scoobie Doo world, this time the zombie monsters are not for real… and beyond that, we have handled our financial crisis much better than the Japanese did… they refused to recognize losses… we are forcing the worst banks to eat their losses… even as the critics of the administrations bank plans say that we are not… critics are wrong… Japan basically said that we must not upset the sushi cart… here Tim Geithner is throwing off equivalent apple carts left and right…. and Obama fired the head of GM… in Japan he would be enshrined in the Japanese hall of fame… not like the old Harry Carey days, when the government did not have to take any action positive or negative… not quite the same approach.

Here is the bottom line…

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The Bottom Line!:     The bears keep losing their best arguments… after today’s GDP report and consumption figures… they can no longer claim that the United States is just like Japan… and that is the best piece of negative ammunition that they had… if the headless bears cannot make a case for why things will get better… then they cannot knock down stocks either… yes, the first annual we are not Japan day… has just been declared.    Today’s GDP report should prove to the bears that things are getting better...   Anyway, today is the first national we are not Japan day… with the Dow up 169 points… I say, you bet… Sayonara to Smokey, to Yogi, to Boo-Boo, to Gentle Ben… and all of their friends.

[verbatim recap]

[verbatim recap]

[end of segment]

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