DIY Investor Magazine
/
March 2016
46
The money managers
started 2016 in a blue funk
– but most are too young
to remember what kicked
off at the end of the 1980s
and the fact that, with the
exception of the instigator,
we weren’t then doomed to
years of economic gloom.
In 1988 a clever statistician worked out that the
valuation of the land surrounding the Japanese
Emperor’s palace in Tokyo was higher than all the
real estate in California. Shortly after this revelation
the wheels started coming off the Japanese
economy and its GDP has, relative to what went
before for several decades, flat-lined ever since.
China now has 12% of the world’s GDP, similar
to Japan’s share in 1990 which was also 12%.
In common with the China of today Japan back
then was propelled by massive investment, an
explosive credit growth, a huge trade surplus and
an overvalued currency.
Its stock markets had become the plaything of
the gambling private investor. Japanese bosses
indulged themselves in a massive buying spree of
foreign assets – everything from art to American
steel companies. Now it is the turn of the Chinese
to be seen to be just as profligate.
In the same way as we are told China is the great
God of all things economic, it is amusing to recall
in the 1980s Japan was donning the very same
mantel. And did the world stop when it realised
the Emperor was not wearing the equivalent of
California? No it didn’t.
Our young money managers are short on history
and long on panic. If it was the other way round
they would soon realise the world doesn’t live in an
economic hegemony for very long; it moves on.
THE BULL IN THE CHINA SHOP:
MONEY MANAGERS SHORT ON HISTORY AND LONG ON PANIC
By City Grump
As if on cue, our planet’s most savvy company,
Apple, is reported in the Financial Times’ 21st
January edition, to be shifting its focus to India as
China’s smart phone market slows down. ‘Apple
views India as the most likely replacement for the
booming sales in China that have powered its rise
in recent years,’ it stated. ‘Apple may soon begin to
manufacture in India.
Foxconn, the Taiwanese contract manufacturer that
makes most iPhones announced plans to set up in
India last year.’
I wonder how many worrying themselves silly in
Davos about what Chinese flat-lining is going to
do to their career prospects are entertaining the
thought that India could be where it’s at quite soon.
(Henry Mintzberg described the Davos gathering
as the event ‘where the people who spend all year
causing our problems take a few days pretending
to fix them’)
Most of those strutting round the Swiss mountain
emporium are paid handsomely. If you added up
the remuneration of all present there, I suspect the
total would now buy all of the Japanese Emperors’
land together with much choice real estate in
California as well.
IN 1988 A CLEVER STATISTICIAN WORKED OUT THAT
THE VALUATION OF THE LAND SURROUNDING THE
JAPANESE EMPEROR’S PALACE IN TOKYO WAS
HIGHER THAN ALL THE REAL ESTATE IN CALIFORNIA.
