Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20
Global "Debt Mountain": Beware of This "New Peak" - 13th Nov 20
Overclocking Zen 3 Ryzen 5600x, 5800x, 5900x and 5950x to 4.7ghz All Cores Cinebench R20 Scores - 13th Nov 20
Is Silver Leading Bitcoin or is Bitcoin Leading Silver? - 13th Nov 20
How Elliott Waves Simplify Your Technical Analysis - 13th Nov 20
How to buy Bitcoins using debit/credit card? - 13th Nov 20
Will COVID Vaccine Kill Gold and Silver? - 12th Nov 20
Access to Critical Market Reports - 12th Nov 20
Stock Market Dow Futures Reach 30,000 on News of COVID-19 Vaccine Trials Success - 12th Nov 20
8 Terms & Conditions You Must Know Before Asking For Life Insurance Policy Quotes - 12th Nov 20
Gold Stocks Post 2020 US Election Outlook - 11th Nov 20
Champions’ League Group Stage Draw: All You Need To Know - 11th Nov 20
Stock Market Secular Trend - 11th Nov 20
Stock Market Correction Curtailed by US Election - 11th Nov 20
What Causes a Financial Bubble? - 11th Nov 20
Ryzen 9 5900X RTX 3080 - Scan.co.uk vs Overclockers.co.uk UK Custom PC System Builder Review - 10th Nov 20
Killing Driveway Weeds FAST with a Pressure Washer - Saving Block Paving from LOTS of WEEDs - 10th Nov 20
Trump Fired, Biden Hired, What Next?  - 10th Nov 20
Looking for a Personal Loan? Here Is What You Have To Know  - 10th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

How to Profit From Japan's Stock Market Shareholder Crisis

Stock-Markets / Japanese Stock Market Jul 01, 2009 - 08:09 AM GMT

By: Money_Morning

Stock-Markets

Best Financial Markets Analysis ArticleKeith Fitz-Gerald writes: KYOTO, Japan - Mention Japan and many people think of Geisha, castles and samurai. Mention investing in Japan and the image of an impenetrable wall comes to mind.


I've been extremely fortunate to have seen all of this firsthand - and not just once, but on a pretty consistent basis for the past two decades, when I've been here as a businessman, a resident, and - most recently - as a husband and a parent. Like anyone who's lived as an expat anywhere for an extended stretch, my powers of observation have tuned into specific aspects of the Japanese culture that I find fascinating.

For instance, since the days of the samurai, rarely has anyone ever questioned anybody's authority directly - let alone openly. To do so was to risk the loss of one's head - literally. But for the first time in several hundred years, that reticence to challenge authority is ebbing, and it could be the change that prospective investors have long been looking for.

I recall watching in rapt fascination the whole T. Boone Pickens/Koito Manufacturing battle during my first years here. In case you don't recall, Pickens became Koito's largest shareholder by accumulating more than 20% of the company's stock and then was refused a seat on the board.

The battle came to a head during an annual meeting whose audience was filled with ruffians, embarrassed executives and a crowd of professional hecklers. I didn't understand until years later that there was nothing "random" about that day 20 years ago: The crowd had been stirred up intentionally and professional hecklers had been hired to deliberately break up the meeting. In fact, it was their job to keep Koito Manufacturing's senior executives from having to answer Pickens's pointed questions (although to outsiders, it would just look like some ne'er do wells had gotten out of hand).

Pickens would not be put down.

Much to the chagrin of my Japanese colleagues, I stood up and cheered when the American tycoon picked up his things and famously stormed out with a collection of Japanese media crews in hot pursuit.

Fast forwarding to the present, I find myself reliving those memories, for I'm watching a repeat performance unfold. The cast of players is a bit different - this time it's the Japanese investor, instead of a U.S. corporate raider, that's trying to buck the system - but the plot is much the same.

The normally reticent Japanese investors - long accustomed, or even resigned, to public subtlety and backroom wheeling and dealing - are becoming fed up with this system and are becoming quite brazen in their protests. And very direct, as well.

Pickens would probably love it. In fact, I'm virtually certain that he does, though I've not spoken with him in years.

According to a Nomura Securities Co. Ltd. research report cited here by several news media outlets, more than 70% of individual shareholders intend to vote against management in upcoming elections and on specific issues. Normally, shareholder votes are essentially "rubber-stamp" affairs, pretty much signing off on whatever management wants, so this is an earth-shattering change.

Western institutional investors have picked up on this cultural about-face, since it means they may finally have the voting clout they crave when it comes to obtaining board seats and operational input on how the trillions of dollars they've invested here over the years is put to work. I'm fascinated, because it means that the Japanese executives who up to now had only themselves to answer to must now answer directly - and publicly - to their own investors.

And there are many questions to be answered. Japan's stock market is at 26-year lows and recent economic reports continue to portray poor business conditions here. The so-called "green shoots" of economic recovery that are being written about in the United States look a lot more like weeds here Japan. And barring something miraculous that surfaces in response to the upcoming legislative elections, it's clear to me that Japan's elected leaders learned absolutely nothing from that country's so-called "Lost Decade" - a slowdown that's actually lasted the better part of two decades.

In fact, current Japan Prime Minister Taro Aso has an approval rating is only 19%, the lowest recorded level in history. Primary-schoolteachers are actually admonishing their students not to become like him. Can you imagine?

Openly angry investors I've talked with here in the last few weeks want to know why the return on equity has been so low for so long. They're asking how Japan's once-glorious companies have just fallen off the face of the earth? And then there's capital usage, investment spending and, gasp, the global financial crisis. Who knew what and when did they know it? This is going to get ugly. My father in law, who's normally calm about these things, wants them all lined up and thrown out - after he gets a chance to personally chew them out!

According to the Nomura study, executive compensation and skipped dividend payments are hot buttons, too, for individual investors - and with good reason. For the year ended March 31, about 38% of listed Japanese companies have skipped their dividends or have cut them entirely. For the typical Japanese citizen - who has accepted benevolent leadership for centuries -- this is not only a stunning breech of public trust, but a callous slap in the face that must have been similar to the waning days of the samurai, when various lords called "daimyo" could no longer meet the public obligations of their retainers.

To borrow an old expression, it's clear that the "natives are restless." And it's not just the natives. Such relatively recent Western "imports" as hedge funds and institutional money-management firms are feeling militant, as well.

Southeastern Asset Management Inc. is on the warpath over investments it's made in Nipponkoa Insurance Co. Ltd. The Tennessee-based fund manager owns approximately 17% of Nipponkoa and wants some answers as to why the company's shares have plummeted 19%, when the benchmark Topix Insurance Index has dropped only 6% in a comparable time period.

Twice now - in each of the last two years - Southeastern has attempted to oust Nipponkoa Insurance Co. President Makoto Hyodo for allegedly having run the ship aground.

In a similar fashion, Brandes Investment Partners LP sought a shareholder vote that would have forced Kyoto-based electronics manufacturer Rohm Co. Ltd. to buy back $157 million worth of company stock. Brandes, which owns about 6% of Rohm, felt that the $3.24 billion (311 billion yen) worth of cash and securities Rohm held was excessive, and presumably was a drag on the performance of the company's stock.

On Friday, shareholders sided with Rohm, and with Nipponkoa, in separate company meetings, and voted down the proposals of the two U.S. investors. But the fact that two U.S. institutional investors were brazen enough to launch these shareholder offensives in the first place says a lot about the new tenor of the times - and is clearly a sign of the things to come.

Things have gotten so bad that even Toyota Motor Co. (NYSE ADR: TM) - held out as the "gold standard" of Japanese business practices - is doing the unthinkable. Honorary Chairman Shoichiro Toyoda recently summoned 400 senior executives to a red-brick building in Nagoya - the very same building where his grandfather had manufactured textile looms a hundred years ago, according to a report last week by Bloomberg. The managers had likely expected a typically perfunctory update. Instead, the 84-year-old company patriarch berated the assemblage and scolded them for making some of the same mistakes that steered two of their U.S. counterparts into bankruptcy.

Shock amongst attendees doesn't begin to cover the reaction. "How many times have you made a mistake?" Shoichiro said to Katsuaki Watanabe, the Toyota president who the month before had been told he was being moved aside earlier than planned so that Shoichiro's son, Akio, could assume command of the carmaker.

Shoichiro suggested that Watanabe was so anxious to boost sales and profits that he'd emulated General Motors Corp. (OTC: GMGMQ) and Chrysler Group LLC - both of which are now bankrupt. Toyota, like the two American carmakers, allowed itself to become "addicted" to big expensive cars and trucks and forgot about the customer's needs to save money, added Shoichiro.

But as aggressive and "un-Japanese" as the actions illustrated by these few examples seem to be, they potentially don't hold a candle to the most pressing of all investor groups demanding action right now: Millions of angry Japanese housewives want to know where their husband's retirement funds went.
So what does this mean for the typical investor?

In the overall scheme of things, perhaps not much - at least, not yet. But stay tuned: Chances are good that if this "rebellion" continues, we could see true change here in Japan for the first time in centuries. And that may open the doors for some real investment opportunities and true forward-looking vision.
For those opportunities - and for the many lessons U.S. leaders (both corporate and elected) should take the time to learn from Japan's experiences - it's worth continuing to watch Japan.

You can be certain that we will. And we'll keep you updated.

[Editor's Note: Fourteen trades. All profitable. Since launching his Geiger Index trading service late last year, Money Morning Investment Director Keith Fitz-Gerald is a perfect 14 for 14, meaning he's closed every single one of his trades at a profit. And he did this in the face of one of the most-volatile periods since the Great Depression. Fitz-Gerald says the ongoing financial crisis has changed the investing game forever, and has created a completely new set of rules that investors must understand to survive and profit in this new era. Check out our latest insights on these new rules, this new market environment, and this new service, the Geiger Index .]

Money Morning/The Money Map Report

©2009 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules