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Anime and Manga Fuel Future Demand for Japanese Antiques

Anime and Manga Fuel Future Demand for Japanese Antiques

Japanese anime and manga – Japanese animation and comics, respectively – have taken the world by storm over the past 20 years.  Their beautiful illustrations, compelling storylines and skillful treatment of adult themes have vaulted anime and manga to the forefront of modern culture.  This is in stark contrast to Western cartoons and comics, which are widely viewed as being children’s entertainment (although Disney’s recent treatment of the Marvel Universe is beginning to change these perceptions).

Japanese anime and manga had humble origins.  Early releases from the 1960s, like Osama Tezuka (Astro Boy) and Mach GoGoGo (Speed Racer), often featured stripped down, bare bones animation that depended heavily on reused frames.  But in spite of these tentative beginnings, the genre steadily evolved.

By the 1980s, anime and manga became something that any Japanophile would immediately recognize today.  Groundbreaking animated feature films such as the cyberpunk classic Akira, the environmentalist saga Nausicaä of the Valley of the Wind and World War II tragedy Grave of the Fireflies were all produced during this time.  Anime and manga had finally come of age as a storytelling medium.

Once Japanese creators cracked the code for great anime and manga, they began to export their product worldwide.  And young people around the world quickly embraced the new creative genre with open arms.  Anime and manga are now viewed, read, streamed and purchased all over the globe, from ultra-conservative Saudi Arabia to sophisticated France and everywhere in between.  At this point, Japanese anime and manga are ubiquitous, with anyone under the age of 35 instantly recognizing their characteristic style.

So at this point you may very well ask the question: What does anime and manga have to do with Japanese antiques?

The answer is simple.  Anime and manga have been important vectors for the 21st century export of Japanese traditions, culture and aesthetics to a global audience.  While anime and manga span a multitude of different storylines, almost all of them share a common theme – they emphasize Japanese history, Japanese style and Japanese mythology.  Anime and manga provide ample opportunity for the absorption of traditional Japanese culture by foreigners.

For example, the Japanese samurai is a mythical, larger than life figure in Japanese culture – the East Asian equivalent of the cowboy in the American West.  And, largely due to the influence of anime and manga, samurai are also held in the same esteem abroad.  There are innumerable anime and manga that use the samurai and ninja of feudal, pre-modern Japan as a backdrop, including popular titles such as Naruto, Samurai Champloo and Gintama.

There are many Japanese antiques from the time of the Tokugawa Shogunate that would appeal to these anime and manga fans.  For instance, exquisitely-crafted, Edo-era Japanese samurai sword guards, or tsuba, are readily available for only a few hundred dollars or less.  It is also possible to purchase genuine examples of 18th and 19th century Japanese “samurai money” for less than $100 a coin.

The subtle beauty of the Japanese tea ceremony is something that many younger people will recognize, even if they only have a passing understanding of Japanese culture.  Why?  Because they have absorbed it through countless slice-of-life anime and manga.

I would not be surprised if this familiarity helped to drive future demand for beautiful and durable Japanese lacquerware outside of the island nation.  Vintage or antique lacquerware often figures prominently in Japanese tea culture and is surprisingly affordable.

Even traditional Japanese attitudes towards beauty are slowly seeping into global culture from the export of anime and manga.  The Japanese love of clean lines and uncluttered design is almost universally reflected in modern aesthetic trends.  I believe this will ultimately have a profound impact on the demand for Japanese antiques.

For instance, shin hanga was an early to mid 20th century Japanese print movement that combined traditional Japanese themes with groundbreaking Western artistic understanding of light and perspective.  It was an export-oriented artistic movement that was wildly popular in the West in the period between World War I and World War II.

In many ways, Japanese shin hanga prints are precursors to today’s manga comics, displaying the same technical accomplishment and classic Japanese sensability.  Not only that, but vintage reprints of these delightful Japanese antiques are readily available for relatively modest prices.  As little as $100 or $200 can get you an aesthetically compelling example to hang on your wall.

I grew up in the 1980s watching the Japanese-derived animated television series Robotech and Voltron.  In the 1990s, I raptly watched the anime Sailor Moon on Cartoon Network.  In 2000, I stumbled upon the anime masterpiece Neon Genesis Evangelion, which forever changed my perception of what an animated television show could be.

Since that time, I have devoured anime and manga wherever I found them.  And, as a result, I fell in love with Japanese culture.  Not only that, but it has also spurred an interest in Japanese antiques that I almost certainly wouldn’t have had otherwise.

I don’t believe I am alone in this trend.  At just over 40 years old, I am among the first generation outside of Japan to have really embraced this new form of entertainment.  Most anime and manga fans are younger than I am and their interest in Japanese culture, history and design is inexorably growing.  You can bet that Japanese antiques and art will be on their radar as they mature into their 30s and 40s.

 

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Fine Art and Antiques – The Last of the Debt Free Assets

Fine Art and Antiques - The Last of the Debt Free Assets

A common nugget of modern-day investing wisdom is that investors should exclusively buy solid, dividend paying companies and then sit back and relax.  According to this thinking, purchasing dividend paying stocks that have been around for many decades ensures that the holder will receive a fair return on his money.

Every time I hear this advice dispensed (which is a lot), I quietly wonder to myself what exactly makes a company “solid”.  Many people conflate companies that have been paying dividends for many years with the idea of corporate solidity.  Nowhere is this idea more evident than with the so-called Dividend Aristocrats – S&P 500 firms that have raised their dividends for the last 25 years in a row or longer.

Of course, this glib analysis often mistakes historical happenstance for solid fundamentals.  As an example, I think it is instructive to take a look at what happened to an entire cohort of Dividend Aristocrats during the financial crisis of 2008-2009.

Of the 59 companies that were members of this elite group of “solid” companies heading into the financial crisis, only 36 remained five years later.  Those 23 Dividend Aristocrat dropouts represent a harrowing 40% failure rate.

And the reason all of those once venerable companies came crashing down to earth can be summed up in one word – debt!  A large number of the fallen Dividend Aristocrats were financial firms that were absolutely drowning in debt.  Most of the rest that cut their dividends also had excessive debt.

Unfortunately for investors, the problem of excessive corporate debt isn’t exclusive to financial companies or dividend aristocrats.  Household-names such as Coca-Cola, IBM, Home Depot and Verizon are all significantly over-levered at the moment.  And while corporate leverage has done wonders for the earnings and share price of these companies over the last few years, it is certain to hobble them when the next financial downturn arrives.

So buying “solid, dividend paying” stocks seems like sheer insanity to me, if for no other reason than that there are basically no good companies left to buy.  Over the past decade of ultra-low interest rates, corporate management simply couldn’t resist the temptation to borrow gobs of money in order to buy back shares and make ill-advised acquisitions.

As a result, many of today’s seemingly stalwart companies will undoubtedly hit the wall in another financial crisis, perhaps even a mild one.

Regrettably, many asset classes other than stocks also suffer from debt-related issues.  Real estate, for example, is usually purchased via a mortgage.  That leaves almost all commercial, residential and industrial real estate heavily levered, which puts it at considerable risk in the case of an economic downturn.  In such a situation, it would be foolhardy to expect real estate prices to maintain their currently elevated levels.

Even bonds and other fixed income instruments are weakened by the oversaturation of debt in the economy.  When debt levels are low, the chances that a company will be able to make good on its bond obligations are high.  But when debt levels are out of control, like they are at the present, it dramatically increases the possibility that corporate default will be the only viable solution.

So if stocks, bonds and real estate are all destined for a painful future, what kind of assets do we want to invest in?  Well, in my opinion, we want debt free assets.  These are assets that have no debt liability in their financial structure (so stocks and bonds are largely out).  It also excludes assets that are primarily purchased via debt financing (like real estate).

Once you start looking for debt free assets you will quickly discover that there are very few out there, which makes them all the more desirable.  The largest category of debt free assets, as far as I can tell, is tangible assets, like precious metals, fine art and antiques.  These assets have been used as a store of wealth by the rich and privileged for thousands of years, ensuring capital preservation across countless generations.

These perennially overlooked hard assets sit completely outside the mainstream financial system.  As a result, they have not been sliced and diced by Wall Street the way so many other formerly staid investments have been.

This is a good thing, by the way.  It means that these debt free assets have avoided the unholy machinations of Ivy League MBAs, hedge fund con men and other Wall Street operators.

It also means that you can pick up desirable vintage fountain pens for just $200.  Or you can buy genuine World War II era U.S. military insignia for only $75.  Or you can purchase an award-winning, hand-made woodblock print for a very reasonable $250.

Of course, if antiques and fine art don’t impress you, you can always make an investment in the oldest and most recognized of debt free assets – precious metal bullion.  Gold bullion coins like American Eagles, American Buffalos, Canadian Maples Leafs and Australian Kangaroos are all great choices.  Silver bullion coins such as American Eagles, Canadian Maple Leafs, Chinese Pandas and Australian Kookaburras work for investors who want to spend less money.  Even platinum coins and bullion bars are readily available for those with more exotic tastes.

Whatever debt free assets you choose to buy, be secure in the knowledge that they can never default, go into receivership or be cancelled.  When you buy debt free assets, they are yours forever, until you sell them at a time and place of your choosing.  And in today’s world of over-levered corporate behemoths, that insight is priceless.

 

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Declining U.S. Dollar Hegemony and its Investment Implications

Declining U.S. Dollar Hegemony and its Investment Implications

The U.S. dollar is currently the world’s undisputed world reserve currency.  It is estimated that the global share of foreign exchange reserves kept in U.S. dollars has been consistently hovering around 64% for several years.  This is extraordinary, considering that the U.S. economy only constitutes about 25% of global GDP.

One side effect of U.S. dollar hegemony is that greenbacks are accepted in exchange for goods and services all over the world.  Couple this with the United State’s history of low inflation and strong economic growth and it is easy to see why the dollar became the de facto global reserve currency in the post World War II era.

In fact, in some countries U.S. dollars are considered far superior to the prevailing local currency.  Average people in countries as diverse as Argentina, Venezuela, Vietnam, Greece, Zimbabwe, Egypt and Nigeria all hoard U.S. dollars in an effort to preserve the purchasing power of their savings.  It is much better to have a wad of $100 bills stashed under the mattress, rather than a pile of rapidly devaluing Argentinean pesos, Venezuelan bolivares, or Egyptian pounds.

But U.S. dollar hegemony has also conferred what the French Minister of Finance, Valéry Giscard d’Estaing, referred to in the 1960s as America’s “exorbitant privilege“.  This is the ability of the country that issues the global reserve currency to run persistent current account deficits, allowing it to consume resources far in excess of those that it produces.

U.S. dollar hegemony has manifested itself in some surprising ways.  For example, in 2016 it is estimated that the United States consumed 7,230 metric tons of silver, or more than 26% of global mine production.  This is all the more shocking when one realizes that the population of the United States is only 4.3% of the world’s population.

A similar story unfolds for other luxury goods.  U.S. diamond demand is estimated to be over 35% of the global pie.  U.S. platinum demand is around 17.5% of global mine supply.  I could not find data on colored gemstones, but you can bet that the trend is the same.  With the exception of silver, the United States is not a significant producer of any of these materials – only a major consumer.

Gold is one of the few luxury raw materials where the U.S. does not take the lion’s share of global production.  It only consumes about 193 metric tons of gold per annum – a mere 6% of total mine supply.  But the U.S. is still the 3rd largest consumer of gold in the world.  It is only surpassed by China and India, two nations that are absolutely obsessed with gold.

All of these statistics paint an alarming picture, especially considering that the global supply of luxury raw materials is slowly drying up.  A world where the U.S. buys whatever it wants, regardless of its industrial production or GDP, does not seem like a very sustainable economic system.  And when we examine U.S. dollar hegemony closely, we see the first signs of cracks beginning to appear.

After the 2018 tax cuts passed under the Trump administration, the United State’s budget deficit is projected to balloon to $1 trillion.  That is disquieting enough by itself, but it doesn’t even contemplate the possibility of a recession or other systematic economic problem.  If the U.S. does enter a recession, you can expect the budget deficit to rapidly inflate to a staggering $2 trillion.

Of course, I’m not a hyperinflation alarmist.  Even these stupendously large deficits will not end U.S. dollar hegemony by themselves.  But they might just signal a shift towards the eventual unraveling of our current economic system.

One way or another, the United States will one day no longer be able to grab an outsized portion of the earth’s bounty.  A single country laying claim to 1/4 of the world’s silver or 1/3 of the world’s diamonds is patently ridiculous.  It cannot continue and will not continue, even if the exact timing and mechanism by which U.S. dollar hegemony will unwind is unknown.

Even now, the world’s sole superpower status is being challenged by China.  India is also on the horizon as an eventual economic competitor.  Either the U.S. dollar is destined to fall in value or competing currencies will strengthen considerably.

Of course, the gradual decline of U.S. dollar hegemony begs a very simple question.  If the rest of the world saves in U.S. dollars, then what should U.S. citizens save in?  I will give you a hint here.  The answer isn’t dollars.

Instead, I believe that it would be wise to invest in tangible assets, such as fine art, antiques, gemstones and bullion.  These hard assets will help preserve and grow the purchasing power of your money during market crashes, currency crises and other major economic dislocations that are sure to come.  This is especially important as the global financial system evolves and the United States inevitably loses its exorbitant privilege.

Perhaps most importantly, holders of U.S. dollars still have access to cheap hard assets today.  People like you and I should take advantage of this fleeting strong dollar opportunity to add tangible investments to our portfolios while we can.  Although U.S. dollar hegemony is clearly in decline, investing in fine art, antiques and bullion can help you avoid the worst fallout from the changing of the economic guard.

 

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Your Retirement Calculator Is Lying to You

Your Retirement Calculator Is Lying to You

One thing I have learned in life is that people become very angry when you gently suggest to them that the way they have been getting rich will most likely not work in the future.  Unfortunately, when you work in the financial services industry, this can make it difficult to avoid awkward conversations.

Of course, a lot of people don’t bother sitting down in front of a real live person anymore in order to analyze their financial situation.  Instead, they choose to use an internet retirement calculator.  This has the advantage of allowing you to scream obscenities at it, safe in the knowledge that you can’t hurt the AI’s feelings.

Every financial company worth its salt has a retirement calculator on its website, including Vanguard, Fidelity, Charles Schwab, Edward Jones and many others.  They ask you to input a tangle of personal information like your age, current savings, salary, etc.  Then they spit a nice definitive answer back out at you.

Most of the time, the “bottom line” returned by a retirement calculator makes us feel anxious or inadequate.  Occasionally it makes us feel satisfied or superior.

But almost every retirement calculator asks for a single number that is more important than all the others.  It is a number that is hardly ever talked about, but is vitally important for investors.  This golden number is the return expectation, sometimes known as the discount rate.

Return expectations are crucial because a high rate of return will quickly grow even a small pile of money into a huge stash in very little time.  In contrast, a low rate of return means that a modest amount of savings will remain modest for an excessively long time.

We are all interested in achieving a high rate of return on our investments.  And the companies that design retirement calculators understand this.  They want us to feel good about our investment and retirement prospects.  Otherwise, we would all be too depressed to save anything – a situation which isn’t conducive to driving profits for large financial firms.

There is only one little problem for these financial firms and the retirement calculators they’ve created.  The default return expectations baked into most retirement calculators are, in a word, insane.  I’ve seen numbers that range from 5% on the low end to around 12% on the high end.

But these numbers are so unrealistic as to be laughable.  Even the 5% expected rate of return, while certainly better than double digit return assumptions, is unrealistically sanguine.  This is because the U.S. stock market (along with many other global equity markets) is trading at historically high valuations (warning: paywall).  A more realistic estimate for long-term stock returns would be in the 1% to 2% range, a possibility that effectively no one is planning for right now.

Relying on a balanced portfolio of stocks and bonds in order to pad the returns in your retirement calculator isn’t going to work either.  A variety of broad U.S. bond indices currently have yields between 3% and 4%.  These low bond returns will drag down the equity return portion of any balanced investment portfolio, assuming those future equity returns somehow manage to climb higher than 4%.

In other words, your investment plan, as validated by your favorite retirement calculator, is an impossible dream.  It is painting a fantasy of tropical white sand beaches and gently-lapping blue waves, when the ugly reality is likely to be trailer parks, dog food and squalor.

I get it.  You’re angry.  You don’t like me implying that the nice man who wears a crisp suit at your local brokerage office is lying to you.

And, to be honest, your investment advisor might not even be trying to intentionally mislead you.  He may simply be ignorant of reliable long-term valuation measures and what they portend for future asset returns.

Look, I’m not telling you this to make you upset.  I’m telling you because someone needs to tell you before it’s too late.  The financial media is full of cheerleaders, charlatans and hacks.  They will say whatever their boss tells them they should say in order to get next week’s paycheck.

They don’t have to live with the consequences of their bad financial advice.  You do.

So I implore you to get diversified – really diversified.  Don’t expect that adding another index fund to your 401-k is going to be enough.  It almost certainly won’t be.

Instead you’ll need to do some intellectual heavy lifting.  You’ll have to research investments that you never knew existed.  You’ll have to consider investments that might have seemed ludicrous just a few years ago.

Learn about investing in tangible assets, like fine art, precious metals, antiques and gemstones.  They aren’t a panacea by any stretch of the imagination, but they can’t be printed by the world’s deranged central bankers either.  And always be sure to take physical delivery of anything you buy.  In the future, if you can’t hold an asset in your hand, the chances are very good that you won’t own it in any meaningful sense of the word.

I don’t think you can automatically expect to garner double digit returns in any asset class.  But you will have a much better chance of meeting your financial goals if you have a healthy allocation to tangible assets.  Your retirement calculator may whisper sweet little lies into your ear, but don’t be fooled.  The investing future belongs to those who refuse to be deceived.

 

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