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GMO's Ed Chancellor On Whether Japan's Quintuple D's Mean Another Lost Decade

Tyler Durden's picture


GMO's Ed Chancellor submits:

The purpose of this essay is to address certain common perceptions, or rather misperceptions, about Japan that prevailed before the latest crisis. In particular, I wish to examine the dreaded Ds which have afflicted Japan in recent years: demographics, deficits, deflation and (corporate) decline – to which must now be added (natural) disaster. Do investors in Japanese stocks face yet another lost decade?...There’s little doubt that Japan’s economy is capable of growing again and that returns on investment are capable of improving. All that’s needed is the will. As a nation, Japan has often moved at a painfully slow pace. But few peoples have demonstrated such a capacity for rapid change once they have decided upon it. The Japanese modernized at a blinding pace after the Meiji Restoration of 1866. The same spirit was on display during the reconstruction miracle after the Second World War. It had become fashionable to decry the unadventurous younger generation as stay-at-home “herbivores.” Yet the world’s admiration for the Japanese people has been rekindled by their stoic response to the most recent national catastrophe. If this spirit and sense of unity were directed toward Japan’s economic revival, a third lost decade would surely be averted.

Full white paper:

Ed Chancellor Another Lost Decade from Japan


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Mon, 04/11/2011 - 20:22 | 1159784 Spalding_Smailes
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WASHINGTON, D.C. – April 11, 2011 – The Association of American Railroads (AAR) today reported monthly rail carloads in March 2011 increased 3.4 percent compared with the same month last year, for a total of 1,493,553 carloads. According to AAR’s monthly Rail Time Indicators report, intermodal traffic in March increased 8.5 percent for a total of 1,111,301 trailers and containers compared with March 2010. On a seasonally adjusted basis, carloads were up 2 percent and intermodal was up 0.5 percent over February 2011. "As the economy steadily improves, rail traffic is continuing to make gains as well," said AAR Senior Vice President John Gray.?"And we are seeing intermodal traffic make larger gains with the containerization trend continuing. Containers accounted for 85 percent of intermodal traffic in the first quarter of this year."

March also saw the addition of 1,198 employees, bringing the total number of Class I rail employees to 154,502 nationwide. As of April 1, 2011, 283,649 freight cars, or 18.7 percent of the fleet, remain in storage. This represents a decrease of 22,667 cars from March 1, 2011.

March 2011’s carload traffic percentage increase is the lowest of any month since early 2010 due, in part, to strengthening rail traffic volumes in the 2010 comparison month. Despite that, March 2011 marks the thirteenth straight month for carload and the sixteenth straight month for intermodal traffic increases on a year-over-year basis, showing the continued gradual upward trend in rail traffic.

Overall, 15 of 20 commodity categories saw carload gains on U.S. railroads in March 2011 compared with March 2010. Traffic gains were led by metallic ores, up 45.8 percent; motor vehicles and parts, up 17.6 percent; pulp and paper products, up 16.2 percent, and petroleum and petroleum/coal products, up 14.5 percent. Of the five commodity categories reporting declines for the month only two saw significant decreases: primary forest products, down 15.4 percent, and waste and nonferrous scrap, down 11.7 percent.

Mon, 04/11/2011 - 20:47 | 1159835 hambone
hambone's picture


thanks for the ohhhh so off topic post...gee, suprise suprise, massive unsustainable budget deficits and free money create stagflation and marginally higher economic activity.  Why don't you just post the site w/ the data - folks should review this recovery against the 10yr trend...funny then folks would have context?

Do you think at all before cutting and pasting???

Mon, 04/11/2011 - 20:56 | 1159879 Spalding_Smailes
Spalding_Smailes's picture

Your right, Pomo and QE are driving our 13 trillion dollar economy and its the reason for the strong earnings by 90% off the fortune 500 behemoths over the last eight quarters ....


 Turn off Dancing With The Stars  and please, read a book sometime ....  Start with .... Money : Whence It Came, Where It Went - John Kenneth Galbraith

Mon, 04/11/2011 - 21:00 | 1159908 hambone
hambone's picture

Good one but I'm partial to American Idol.

BTW - What percentage of our economy does the $1.5T annual budget deficit account for now...bout 13%!  Absent that or with that the economy which feeds all those companies is in deep doo.  Gosh, in fact if we look at the last 8 qtrs I bet we'd see the corresponding growth in debt to fund those earnings.  Watch your head on that debt ceiling.  Could be a bumpy ride.

Mon, 04/11/2011 - 21:14 | 1159939 disabledvet
disabledvet's picture

i'm looking forward to that show about "singing."  i'm being serious.

Mon, 04/11/2011 - 21:15 | 1159946 masterinchancery
masterinchancery's picture

You mean the foreign earnings driven by the weakening dollar?

Mon, 04/11/2011 - 21:21 | 1159953 Spalding_Smailes
Spalding_Smailes's picture

Well, a business like Starbux is all over the globe now and expanding, and Yum Brands is rolling out new KFC's in China ect ....

Most of the global monsters like these or Google would be bringing in more sales no matter what ...


In China, KFC has achieved such dominance over McDonald’s and local rivals that Colonel Harland Sanders’s image is a far more common sight in many Chinese cities than that of Mao. That accomplishment is striking in a country where foreign companies often stumbled and ran into roadblocks in the past.

Mon, 04/11/2011 - 20:24 | 1159785 Hedgetard55
Hedgetard55's picture

It won't be easy recovering if half of Japan becomes uninhabitable due to radiation for 50,000 years, no matter how resilient they are.

Mon, 04/11/2011 - 23:49 | 1160446 Stuck on Zero
Stuck on Zero's picture

It rains quite a bit in Northern Japan.  All that radiation will wash into the ocean and be swept by the Japan current into the North Pacific Ocean.  It will end up in Malibu.

Mon, 04/11/2011 - 20:32 | 1159808 Brian
Brian's picture

[D]ude, [D]a [D]ebt [D]ummy, makes it impossible for Japan to do anything but [D]efault.

It is not a question of willpower, it's a question of 220% debt to GDP.  They are toast, they have already fallen off the cliff and are just waiting to hit the ground.

Mon, 04/11/2011 - 22:39 | 1160178 flacorps
flacorps's picture

Diasporas sometimes prove advantageous to a people. Suppose their best and brightest immigrate, while those left behind are forced to (gasp!) import young laborers (with their heedless sense of invulnerabity) from the rest of Asia. Could shake things up a bit, could it not?

Mon, 04/11/2011 - 22:42 | 1160202 Hedge Jobs
Hedge Jobs's picture

when i saw Quintuple D's i thought this article was going to be about getting lost for a decade in some incredibly large breasts which i think would actually be a good strategy for the next few years.

Can we please be a bit more careful when making up headlines so as not confuse readers.

Mon, 04/11/2011 - 20:30 | 1159809 RobotTrader
RobotTrader's picture

Looks like oil and gold are getting slammed on this news.

All hail the mighty U.S. Dollar as it is suddenly getting bids.

Mon, 04/11/2011 - 20:49 | 1159862 Crisismode
Crisismode's picture


Do you come on this forum and announce the fact everytime that the Dow is "slammed" down 1%?


Hmm, I thought not.


Just checking.

Mon, 04/11/2011 - 21:35 | 1159989 Pool Shark
Pool Shark's picture



Gold is all the way back to where it was... [GASP!] last Thursday!!!!

Total collapse to follow!!!!

[sarcasm off]


Mon, 04/11/2011 - 21:44 | 1160005 malek
malek's picture


You surely meant obliterated!

Mon, 04/11/2011 - 20:32 | 1159816 disabledvet
disabledvet's picture

well "they didn't invent the word Ninja in Japan for nothing either."

Mon, 04/11/2011 - 20:38 | 1159839 Pez
Pez's picture

or Mutant Turtles

Mon, 04/11/2011 - 21:14 | 1159944 disabledvet
disabledvet's picture

what a way to go:  "Daddy was killed by a teenage mutant ninja turtle."

Mon, 04/11/2011 - 20:34 | 1159820 Id fight Gandhi
Id fight Gandhi's picture

I'm amazed Japans markets get a bid with daily earthquakes and now the worst nuclear accident still ongoing. Who the fuck would buy into that market?

All the cock sucker analysts saying buy the Japanese dips should be called out. This will end in tears.

Mon, 04/11/2011 - 20:46 | 1159856 tom a taxpayer
tom a taxpayer's picture

Rose-colored glasses

Plum wine

Every thing Japanese is coming up roses

Author: a cock sucker analyst with the initials E.C.

Mon, 04/11/2011 - 21:09 | 1159930 tbonetmoney
tbonetmoney's picture

Apparently Ed Chancellor would buy into that market, and also Marc Faber thinks Japanese equities are attractive. Here is a link to an interview with Marc on the Peter Schiff show.

To summarize he believes the yen and JGBs will weaken and stocks will strengthen.

Mon, 04/11/2011 - 21:19 | 1159950 masterinchancery
masterinchancery's picture

Not to mention an ongoing demographic disaster with a birthrate 60% of replacement.

Mon, 04/11/2011 - 22:38 | 1160188 KickIce
KickIce's picture

The same people that buy into ours, the government.

Mon, 04/11/2011 - 20:35 | 1159822 honestann
honestann's picture

I agree with the prevailing high opinion about Japanese individuals.  However, in the world of today, when all large governments worldwide have essentially absolute control over everyone and everything in their countries, the power of individuals has been destroyed.

The world will continue to collapse until the predators-that-be and entire predator-class are literally exterminated.  If that doesn't happen, Japan will collapse, the rest of the world will collapse, and all or most of the human race shall perish.

Predators will not stop.  The only way to stop them is to exterminated them, and then erect never before seen foolproof systems to assure they do not rise and take over the world again.

Mon, 04/11/2011 - 20:47 | 1159875 sabra1
sabra1's picture

when we all turn into mutant zombies, we will attack these predators. there is no way they could kill us again!

Mon, 04/11/2011 - 22:22 | 1160091 bankruptcylawyer
bankruptcylawyer's picture

i flagged this as junk . here's why: 


i hear people all the time crying about how the super rich are destroying the rest of the wolr dna causing a total collapse. the raional amongst us recognize there is a giant ponzi in control of the market and that a shift of large proportions is inevitable. we also acknowlege that no system of social organization can be intetionally shifted by a mass of anarchic chatter, it requires organized groups to change other organized groups. 


the tone of your criticism is all too familiar, and sounds psuedo-communist anarchic in nature. the ponzi can be destroyed by rational exploration of methods of allowing it to collapse while replacing it with a better social framework that does not falsely claim to abolish the existence of class within its framework. 

class systems exist as a generic organization of human beings in large groups, they are not going away. the current ponzi-class system is going to collapse on its own because human beings and individuals will not accept slavery for prolonged periods of time, and it will require a GOOD set of ideas , organizations, localities and rationality to set up new ways of accomplishing TRUST again in society and its institutions. 


crying about exterminating 'them' is stupid. yes, a large class of criminals has stolen ungodly sums, but no, that's not going to be solved by yelling about 'them' and 'us'. no one is going to buy communist bullshit in america. it's not the rich per se' that are the problem , it's the cheaters and institutionalized cheating that has gotten out of control.

this includes, wall street , unions, government accountants, the gamut of insurance industries, pretty much all institutions are on the ax here and need to be reformulated. that won't be accomplished by exterminating any vaguely described group. that will make matters much much worse, perhaps irreversably worse.


Mon, 04/11/2011 - 22:45 | 1160213 flacorps
flacorps's picture

Nasty as it was, the French made it through their revolution.

Tue, 04/12/2011 - 01:12 | 1160635 ViewfromUnderth...
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and left their "central bank" intact

Tue, 04/12/2011 - 03:41 | 1160759 honestann
honestann's picture

If you think I'm a communist, or a socialist, or any form of statist or authoritarian, you are absolutely 100% off the mark.  I recognize that all organizations are fictions, which in fact is clearly recognized in fundamental law by calling them "fictitious entities".  And "fiction" means "the supposed referent of this concept does not exist".  Therefore, what we have today is:

predators DBA large corporations
predators DBA federal government
predators DBA federal reserve & central banks

It is past time to stop replacing one group of predators with a slightly different variety.  It is past time for humans to clearly understand that only individuals exist, and any claim by anyone (supposedly on behalf of some fiction organization) that any individual must pay them, obey them, buy their services, or follow their rules must be totally rejected, and answered with high velocity lead or equivalent.

I owe nothing to anyone that I did not voluntarily contract with.  Nobody is a "citizen", since "citizen" is an exact synonym for "slave".

What people do not realize is the consequences of modern technologies on "human monitoring and human control".  If the predators-that-be and predator-class are not soon stopped, they will literally enslave then destroy the vast majority of humans... because finally they will have the technology to do so.  Humans better wake up soon, and get real.

Mon, 04/11/2011 - 20:42 | 1159849 max2205
max2205's picture

I hope they can still crank out those cool robot puppies

They should merge with Korea Vietnam and the PI

Mon, 04/11/2011 - 21:38 | 1159998 Caviar Emptor
Caviar Emptor's picture

Unfortunately, Japan is only a few steps further down the road than the U.S. 

All of the Fed's great tools have been used for 20 years to no avail in Japan: QE, ZIRP, and expantionist monetary policy a l'outrance. 

So I'll repeat what I said: Japan is the best case scenario because they did their money printing during a time of strong global growth and before the era of peak natural resources. The Fed's remedies are not correcting deflation in the real US economy while contributing to inflation of all inputs necessary for economic growth

Mon, 04/11/2011 - 22:33 | 1160134 luckly123
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Tue, 04/12/2011 - 03:26 | 1160750 topcallingtroll
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I cant believe this asshole is still around. I get tired of chinks spamming zero hedge.

Mon, 04/11/2011 - 22:37 | 1160158 luckly123
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Mon, 04/11/2011 - 22:48 | 1160257 zen0
zen0's picture

I would begin to think that the possibility of a continuous source of increasing radiation contaminating the world for millenia uncountable would dampen investment enthusiasm of the moneyed classes.

Apparently not.

Mon, 04/11/2011 - 23:04 | 1160313 flacorps
flacorps's picture

Dead presidents fear no isotopes.

Mon, 04/11/2011 - 23:55 | 1160466 KickIce
KickIce's picture

You forgot da radiation.

Tue, 04/12/2011 - 05:24 | 1160809 ivars
ivars's picture

Short summary with data and table why Fukushima moved into 7 and how 10% of Chernobyl has been calculated. Actually, Cs-137 with 30 years half life is has been already leaked at amounts =20% of Chernobyl total. And its reactor 2 which has been and still is responsible.

Tue, 04/12/2011 - 05:54 | 1160839 sbenard
sbenard's picture

I would add a sixth "D" -- DEBT!

Tue, 04/12/2011 - 07:16 | 1160892 Urban Redneck
Urban Redneck's picture

When the Cold War between the USSA and USSR died, and the fools on TV prognosticated about a "Peace Dividend" a vacuum was created foreign aid and FDI.  In stepped the Japanese and the Chinese, providing aid and making investments in developing and undeveloped markets, and an economic Cold War over resource and market access ensued.  Japan has some powerful tools at its disposal, and a history of TPTB coordinating action across private entities, but they need to bring and play a real A-game to pull it off.  Their performance at Fukushima is more indicative of an A-game that can't find its own ass with both hands, so I wouldn't hold out too much hope at this point.    

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