6 ms·

Bank of Japan to be top shareholder of Japan stocks

52 points by apo 7y ago

yasp 7y ago
Partially off topic: if the US Fed bought publicly traded equities, would we know about it?
- ryeights 7y ago
  It's widely suspected that this is part of the job of the Working Group on Financial Markets...
  - User23 7y ago
    Also known as the Plunge Protection Team.
- flocial 7y ago
  I would hope so. https://www.federalreserve.gov/monetarypolicy/openmarket.htm https://www.federalreserve.gov/monetarypolicy/openmarket.htm https://www.federalreserve.gov/aboutthefed/files/combinedfinstmt2018.pdf https://www.federalreserve.gov/aboutthefed/files/combinedfin...
- deleted 7y ago
  [deleted]
- roenxi 7y ago
  It'd be a conspiracy theory, but one that was unlikely rather than crazy. There is evidence that foreign central banks are active in the US markets though [0]. [0] https://www.cmegroup.com/company/membership/files/CBIPFAQ.pdf https://www.cmegroup.com/company/membership/files/CBIPFAQ.pd...
  - yasp 7y ago
    Why is that a "conspiracy theory"?
- reasonablemann 7y ago
  Somewhat related, it's entirely possible that someday social security will be revamped to include equities similar to how Canada runs its pension plan. The ideal time for this would be once the current house of cards world economy collapses. Could be 10-15 years off yet.
flocial 7y ago
America by comparison [0]. Japan has a declining population, the pension scheme is considered to be running on fumes by most, and now the stock market is propped up by government itself. https://www.businessinsider.com/who-actually-owns-the-stock-market-2016-5 https://www.businessinsider.com/who-actually-owns-the-stock-...
- lotsofpulp 7y ago
  Same situation in US in my opinion. It’s crazy to not be all in on equity index funds, since everyone is invested in them via 401k and pension funds, of course the government is going to do whatever it takes to prop up the value.
  - deleted 7y ago
    [deleted]
  - doctorpangloss 7y ago
    You're getting it backwards my dude. Baby boomers turned 65 this year, the peak retirement there will ever be in the history of the world. Individuals selling small amounts of stock, each for slightly below midpoint, actually has a much larger negative effect on prices than one large sale at slightly below midpoint does. Think about what the order book looks like over time. People expect a sudden recession. The ride to the bottom is going to be a-historically long and slow, as retirement accounts unwind contractually slowly, and big institutional investors wait out lower capital gains taxes.
    - scotradamus 7y ago
      This is interesting, and hadn't thought about the cashing out of index funds with age. Given that idea though, the money IS being spent, put back into the economy.
    - lotsofpulp 7y ago
      I think the government will be incentivizing stock ownership much more via state sponsored 401k, or HSAs, or 529, etc. Even now, we're only at just above 50% of population having a stake in public companies: https://www.chicagotribune.com/business/ct-americans-dow-22000-investing-20170803-story.html https://www.chicagotribune.com/business/ct-americans-dow-220... Also, number of public companies is decreasing, with the bigger players getting bigger and bigger. And finally, I would expect even more international funds to flow in to the large conglomerates as their efficiencies of scale take over.
roenxi 7y ago
I enjoy defending capitalism; I think the principle of funneling resources to people who create more resources is sensible. It needs to be underscored that whatever this is, it isn't capitalism. Exactly which -ism it is I know not; but it is a terrible idea. Central banks interfering in markets can only be to raise prices long-term. They aren't going to interfere to drop prices, the political pressure is unbearable over the medium term. I'l jump to the American Fed because I know a bit more about it - they haven't been able to sustain interest rate rises in my lifetime [0], there is a very clear downtrend. This sort of activity in turn disables all the signals used to vent incompetent companies from the system. A direct result of these policies by the BoJ will be companies that take in resource, and churn out value that is less than the inputs. It is unsustainable, stupid and destructive. There are no excuses for it. I lump the US Fed's QE programs into the same basket, but at least they muddy the waters enough that the links aren't obvious to a neutral observer. The Bank of Japan's activities are sick. [0] https://tradingeconomics.com/united-states/interest-rate https://tradingeconomics.com/united-states/interest-rate
- dunstad 7y ago
  Funneling resources to people who create more resources does make sense, provided the assumption that those specific individuals are the key ingredient to the resource creation. From what I understand, the people you defend capitalism from tend to assume that those individuals themselves are less relevant than is their place in the larger system. Does this summary of the arguments line up with your experience?
  - roenxi 7y ago
    Genuinely productive people are pretty rare (1 in 100 type numbers). I can't claim to know exactly what a debate opponent is thinking, but usually I assume: 1) Most people are more involved with the famous and common 'bullshit jobs' instead of the much fewer super-productive jobs - like a couple of farmers who can feed orders of magnitude more people than just themselves. Maybe they haven't interacted with the parts of the economy that do genuine wealth-creation and don't understand it. 2) They don't accept that incentives matter more than inherent nature, so they believe the productive will continue producing even if the incentives to do so are reduced, so resources can be redirected to 'those with needs'. The second is a pretty defensible position, although obviously I disagree most of the explicit and implicit assumptions. As an aside, this has already become one of my fastest down-voted comments. Could someone stop by and explain what they don't like about it? I didn't think it was very inflammatory.
skybrian 7y ago
If the companies they buy end up making money, might this be an interesting alternative to taxes as a way to fund the government?
- deleted 7y ago
  [deleted]
- harshreality 7y ago
  Corporate profits come from somewhere. It would be a switch from an income tax to a (hidden) federal consumption tax. The initial money to pay for stock has to come from somewhere, and that somewhere would be more debt or traditional taxes. The federal government would control the companies (assuming it acquires majority shares), even if government employees aren't staffing them. That's socialism. Socialism/communism is bad because if given the opportunity for direct control, government can't help tinkering in business affairs to score political points, rather than because it makes the business better.
  - skybrian 7y ago
    Other than raising the money, that doesn't seem too hard to solve. The Federal Reserve could buy index funds and be a passive investor like everyone else. I'm reminded of Matt Levine's running joke (?) about whether or not index funds are socialism.

52 points by apo 7y ago

yasp 7y ago

Partially off topic: if the US Fed bought publicly traded equities, would we know about it?

ryeights 7y ago
It's widely suspected that this is part of the job of the Working Group on Financial Markets...
- User23 7y ago
  Also known as the Plunge Protection Team.
flocial 7y ago
I would hope so. https://www.federalreserve.gov/monetarypolicy/openmarket.htm https://www.federalreserve.gov/monetarypolicy/openmarket.htm https://www.federalreserve.gov/aboutthefed/files/combinedfinstmt2018.pdf https://www.federalreserve.gov/aboutthefed/files/combinedfin...
deleted 7y ago
[deleted]
roenxi 7y ago
It'd be a conspiracy theory, but one that was unlikely rather than crazy. There is evidence that foreign central banks are active in the US markets though [0]. [0] https://www.cmegroup.com/company/membership/files/CBIPFAQ.pdf https://www.cmegroup.com/company/membership/files/CBIPFAQ.pd...
- yasp 7y ago
  Why is that a "conspiracy theory"?
reasonablemann 7y ago
Somewhat related, it's entirely possible that someday social security will be revamped to include equities similar to how Canada runs its pension plan. The ideal time for this would be once the current house of cards world economy collapses. Could be 10-15 years off yet.

flocial 7y ago

America by comparison [0]. Japan has a declining population, the pension scheme is considered to be running on fumes by most, and now the stock market is propped up by government itself. https://www.businessinsider.com/who-actually-owns-the-stock-market-2016-5 https://www.businessinsider.com/who-actually-owns-the-stock-...

lotsofpulp 7y ago
Same situation in US in my opinion. It’s crazy to not be all in on equity index funds, since everyone is invested in them via 401k and pension funds, of course the government is going to do whatever it takes to prop up the value.
- deleted 7y ago
  [deleted]
- doctorpangloss 7y ago
  You're getting it backwards my dude. Baby boomers turned 65 this year, the peak retirement there will ever be in the history of the world. Individuals selling small amounts of stock, each for slightly below midpoint, actually has a much larger negative effect on prices than one large sale at slightly below midpoint does. Think about what the order book looks like over time. People expect a sudden recession. The ride to the bottom is going to be a-historically long and slow, as retirement accounts unwind contractually slowly, and big institutional investors wait out lower capital gains taxes.
  - scotradamus 7y ago
    This is interesting, and hadn't thought about the cashing out of index funds with age. Given that idea though, the money IS being spent, put back into the economy.
  - lotsofpulp 7y ago
    I think the government will be incentivizing stock ownership much more via state sponsored 401k, or HSAs, or 529, etc. Even now, we're only at just above 50% of population having a stake in public companies: https://www.chicagotribune.com/business/ct-americans-dow-22000-investing-20170803-story.html https://www.chicagotribune.com/business/ct-americans-dow-220... Also, number of public companies is decreasing, with the bigger players getting bigger and bigger. And finally, I would expect even more international funds to flow in to the large conglomerates as their efficiencies of scale take over.

roenxi 7y ago

I enjoy defending capitalism; I think the principle of funneling resources to people who create more resources is sensible. It needs to be underscored that whatever this is, it isn't capitalism. Exactly which -ism it is I know not; but it is a terrible idea. Central banks interfering in markets can only be to raise prices long-term. They aren't going to interfere to drop prices, the political pressure is unbearable over the medium term. I'l jump to the American Fed because I know a bit more about it - they haven't been able to sustain interest rate rises in my lifetime [0], there is a very clear downtrend. This sort of activity in turn disables all the signals used to vent incompetent companies from the system. A direct result of these policies by the BoJ will be companies that take in resource, and churn out value that is less than the inputs. It is unsustainable, stupid and destructive. There are no excuses for it. I lump the US Fed's QE programs into the same basket, but at least they muddy the waters enough that the links aren't obvious to a neutral observer. The Bank of Japan's activities are sick. [0] https://tradingeconomics.com/united-states/interest-rate https://tradingeconomics.com/united-states/interest-rate

dunstad 7y ago
Funneling resources to people who create more resources does make sense, provided the assumption that those specific individuals are the key ingredient to the resource creation. From what I understand, the people you defend capitalism from tend to assume that those individuals themselves are less relevant than is their place in the larger system. Does this summary of the arguments line up with your experience?
- roenxi 7y ago
  Genuinely productive people are pretty rare (1 in 100 type numbers). I can't claim to know exactly what a debate opponent is thinking, but usually I assume: 1) Most people are more involved with the famous and common 'bullshit jobs' instead of the much fewer super-productive jobs - like a couple of farmers who can feed orders of magnitude more people than just themselves. Maybe they haven't interacted with the parts of the economy that do genuine wealth-creation and don't understand it. 2) They don't accept that incentives matter more than inherent nature, so they believe the productive will continue producing even if the incentives to do so are reduced, so resources can be redirected to 'those with needs'. The second is a pretty defensible position, although obviously I disagree most of the explicit and implicit assumptions. As an aside, this has already become one of my fastest down-voted comments. Could someone stop by and explain what they don't like about it? I didn't think it was very inflammatory.

skybrian 7y ago

If the companies they buy end up making money, might this be an interesting alternative to taxes as a way to fund the government?

deleted 7y ago
[deleted]
harshreality 7y ago
Corporate profits come from somewhere. It would be a switch from an income tax to a (hidden) federal consumption tax. The initial money to pay for stock has to come from somewhere, and that somewhere would be more debt or traditional taxes. The federal government would control the companies (assuming it acquires majority shares), even if government employees aren't staffing them. That's socialism. Socialism/communism is bad because if given the opportunity for direct control, government can't help tinkering in business affairs to score political points, rather than because it makes the business better.
- skybrian 7y ago
  Other than raising the money, that doesn't seem too hard to solve. The Federal Reserve could buy index funds and be a passive investor like everyone else. I'm reminded of Matt Levine's running joke (?) about whether or not index funds are socialism.