Gilbert and Linda Rivera are in their 70's and well into retirement,
but one of the things that makes this couple unique is that they never
stopped learning. Unlike many investors, they are in the habit of asking
very good questions and they both require the person answering the questions
to back up their position with solid evidence they can understand and
apply. The couple married right out of college In New York where they
agreed being average was not something to strive for. They stand on a
foundation of being and doing things that are above average.
Gilbert enjoys telling lots of stories. He talked about his various trips on business to Japan. Gil remembers back in 1988-89 when most Americans worried that Japan would become Masters of the Universe by replacing the USA in the number one spot by having the highest Gross Domestic Product in the world. The GDP rate is directly connected with all of the domestic productions and exports of the country. The higher production means higher exports which results to higher GDP rate. Today, we are in economical war and every country wants to be at the top of the list in this economy race. Data from the World Bank are in 2013 US dollars. You probably haven't noticed that Japan quietly slipped from number 2 in GDP to number 3 today. You won't be surprised that China has taken Japan's spot. GDP for Japan stands at $5,149,897 million, China is at $9,020,309 million, and the USA stays in the number 1 position at $16,237,746. There are lots of reasons observers offer for explaining why Japan has slipped and may continue to slide further from number 3. The reasons that make the most sense to me is Japan did not enjoy a baby boom and remained insular from immigration.
You might remember the good old days in Japan when a 1,000 sq ft condo in Tokyo sold for $1M. At that time I understood that the value of the real estate in Tokyo was worth more than the value of the real estate in the USA. Earlier this year, according to The Economist, home prices were picking up globally. The magazine's house pricing index found that values are rising in 18 of the 23 countries they track, compared with just 12 a year ago. Japan, however, has a vastly different reality. As we study the data we see that from early 1991 peak to first quarter 2013, the average home price in Japan is off 52%.
What could this mean to you? Bailout Nation, author Barry Ritholtz, says, "The US residential housing market is tracking the Japanese experience, but shifted 15 years. Japan had their boom peak in 1989 - equities and real estate - and suffered for decades afterwards. The US saw a peak in 1999 (income, employment), 2000 (stock market), 2006 (housing) and 2007 (not tech stocks). We are now a mere decade into the recovery from its credit crisis." Ritholtz reveals that the Japan real estate market and stock market have both been flat for over 20 years. That situation would make it difficult for those well-educated, hardworking citizens to have a nice day. It might also help explain why friends of mine who have visited Japan recently were shocked to find that young people from 20 to 30 years old are still living at home, but aren't having sex. Thanks to the US Census Bureau we can see that Americans in their 20s total over 70 million, which is the same size of the Baby Boom Generation. The USA is also the only industrialized country where the birth rates are higher than the annual death rates.
You've seen the movie
When it comes to country survival, the USA is OK. When it comes to investors who are taking income in retirement, it may become quite a hurdle for that income to last if the US stock market is flat for decades. If what happened to Japan's real estate and stock market happens here now is the time to find out what strategies you can own to weather the storm so you can stay in the game.
Representatives. Securities and investment advisory services offered through NATIONAL PLANNING CORP. (NPC),
NPC of America in FL & NY, Member FINRA/SIPC, and a Registered Investment Adviser
Investors Advantage and NPC are separate and unrelated companies.