The Truth About Investing in U.S. Stocks: Shigenobu Kawada's "U.S. Stock Investment Course Trained by the Media" [Vol.40] Distributed on March 28, 2022
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The Truth About U.S. Stock Investing
［Vol.40］ Distributed March 28, 2022
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Kawada Shigenobu's "America Stock Investing Course Trained by the Media"
*** Table of Contents ***
Market Review
This Week's Pick Articles
Kawada's Stocks of Interest — On Break
Investment Tips
A Walk
What the Ultra-Wealthy Implement: "Private Investment Strategy"
Activity Information
Online Salon “Dream Comes True Wealth-Building School”
An online salon where everyone learns together and motivates each other to achieve wealth. It offers member-only seminars that go beyond what the popular newsletter “The Media-Trained U.S. Stock Course” conveys, and lets you experience the魅力 of U.S. stock investing.
2000 Million Yen Milestone Pace-Setter
Source: Financial Services Agency, created by ExecuTrust Co., Ltd. based on asset-management simulations
*The above figures are only simulations and do not guarantee future investment results. Fees and taxes are not considered here.
Reading guide: assumed returns and target years
3–4%: 30+ years for wrap funds or balanced funds
5–7%: about 25 years for non-U.S. equity funds
8–10%: about 20 years, based on a modest view of S&P 500 gains
S&P 500 Performance Record (dividends reinvested 1970-2021)
Achieve 20,000,000 yen early by taking the right risks
Kawada's message is exceedingly simple. To reach 20,000,000 yen, let your surplus funds work as efficiently as possible. For that, it is crucial that participants properly understand risk and reward. Before reading the weekly newsletter, glance at this table to confirm the correct investment posture.
Now, start the countdown to achieving 20,000,000 yen right away!
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1. Market Review (March 21–March 25)
Major Indices
- Dow Jones: +0.3% - S&P 500 Index: +1.8%
- Nasdaq Composite: +2.0%
= Quick Version =
Bond market fell as fears of tighter monetary policy intensified (yields rose), pushing long-term yields briefly above 2.5%. However, while growth stocks were bought back in the early part of the week, energy and financial stocks also rose.
= A Little More Detail =
With Chair Powell hinting at the possibility of a rate hike exceeding 0.25%, the market anticipated a hawkish stance from Powell, leading to higher rates for the week.
Economic indicators showed initial jobless claims at a post-1969 low, raising concerns about wage inflation.
Besides Powell, other regional Fed presidents expressed a willingness to raise rates, and long-term yields briefly surpassed 2.50% for the first time since May 2019.
Nevertheless, stock markets welcomed higher rates and bought financial stocks; energy stocks rose on higher oil prices due to the Ukraine situation.
Growth tech stocks also advanced on the back of early-week buying pressure, on a weekly basis.
S&P 500 Index — Past Year
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2. This Week's Pick Articles
A column that selects what I found useful for wealth-building, ranks them, and comments from a very personal perspective.
【1】Nikkei Newspaper Financial education, why it has become important 3/19
From fiscal year 2022, financial education will be fully introduced in high school home economics. Financial education has long been taught since postwar times, but its basic premise was “financial education = boosting savings.” Financial education also carried an aspect of “brainwashing” to deter unnecessary asset management.
For a long time after the war, the government promoted saving growth because banks efficiently managed risk transfer when households deposited funds with banks.
But today, many deposited funds go to the Bank of Japan current-account deposits and government bonds, raising concerns about risk-transfer function. In such a situation, diversification beyond bank deposits into investments becomes necessary.
The backdrop of rising necessity for financial education today includes changes in banking functions and the repositioning of deposits. This acknowledges a broader shift in Japan’s financial landscape and bank-centered business models.
【Kawada's Comment】
Why don't Japanese people invest risk-money in the stock market? This highlights an important reason. In private economic activity, financial intermediation connecting investors and companies comes in two forms: indirect finance and direct finance.
Indirect Finance
A company raises funds through loans from financial institutions. The financiers determine who gets loans, so the investment risk is primarily borne by the financial institutions.
Direct Finance
The government or company issues bonds or stocks and raises funds directly from investors. Investors bear investment risk directly but may expect higher returns.
Why is indirect finance dominant in Japan?
To operate a stock market, robust social infrastructure, economic scale, capital accumulation, and a certain level of individual income and investor intellect are required.
Global equity market capitalization
In reality, stock markets exist mainly in developed Western countries and Japan, along with some emerging markets. Among them, the U.S. market accounts for nearly 60% of global market capitalization, while outside the U.S., China and Japan share only a few percent each, with other European powers at around 3% at most.
Stock market introduction allows investors to become owners of companies, leading to more efficient economic operation. However, a side effect is that a portion of the wealthy become even wealthier, widening wealth gaps, fueling speculation, and excessive leverage that can destabilize the real economy.
■ Europe and Japan reject the notion that “money is everything.”
The major continental European stock markets are not very large. Germany and France primarily rely on indirect finance through banks. Why is indirect finance predominant? It is closely tied to each country’s history and governance, but I see it as follows.
Direct finance gives investors more freedom than indirect finance for fundraising (corporate financing). That means money power can empower aggressive actors who challenge existing orders.
Continental Europe, and Japan, prioritize money, rules, history, culture, and respect for the existing order. Japan shows a strong tendency in this regard as well.
■ Money Power that threatens the Establishment is not welcome!
In Europe and Japan, there is strong wariness toward upstarts who threaten the nation’s establishment with money and momentum. Therefore, indirect finance allows a central bank and policymakers to retain some discretion in monetary and industrial policy. This is a reason indirect finance remains dominant in Japan, similar to Europe.
In Japan, individuals who become shareholders cannot exercise shareholder rights to their full extent (beyond laws and regulations). People know this. They think, “Even if I become a shareholder, returns aren’t as expected,” or “I want to freely manage my own company, but regulations and obstacles make it unfavorable.”
Such factors make shareholder-focused management difficult, and consequently shareholder returns are often undervalued. I believe this is another reason why individual investors in Japan have not developed well. What do you think?
【2】The Economist Mar 12 “Is hybrid work the worst of both worlds? | The Economist (Is remote+office work the worst of both worlds?)”
The company expects employees to return to the office. As pandemic-related restrictions ease, employees need to adapt to the hustle and bustle of in-office life.
Wells Fargo, JPMorgan Chase, Morgan Stanley and other Wall Street giants are encouraging employees to return to the office.
Meanwhile, for high-tech companies in remote-work-related sectors, the opposite trend is occurring. In February, Zoom reported a 9% year-over-year drop in Europe, the Middle East, and Africa revenue. Zoom’s market capitalization fell from a peak of $175 billion in 2000 to $35 billion, a fifth of its peak value.
Advantages and areas for improvement of hybrid work
