Vol.33 - Capital Guaranteed Investments & Looking for a House – Making an Offer (Part 3)

**CONTENTS**

-Feature - Capital Guaranteed Investments
-From the Editor
-Forex Weekly
-Yen Watch
-Events
-Job Watch
*Please scroll down below to read the disclaimer*

FEATURE

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Capital Guaranteed Investments
(By Chris Cleary, Banner Japan K.K. | November 4, 2005 | Comment on this Article)

Would you like a capital guarantee on your investment? Most people would, if they could have it. Cash in the bank has one, but then you are stuck with the poor performance of cash (good as a shelter in times of trouble, but longer term the worst performing asset class of the lot). Bonds have a guarantee too, but like cash that is only nominal, and in times of inflation bonds truly are certificates of confiscation. Property tends to retain value long-term and respond well to inflation, but property prices move in cycles and a lot of places have been looking toppy for some time (Japan excepted). And stocks are the mad March hare of investments, with tremendous downside as well as upside volatility – no chance of a guarantee on a stock portfolio.

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FROM THE EDITOR

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Looking for a House – Making an Offer (Part Three)

Once you find a property you like, the act of buying is relatively straight forward, because your Realtor will pretty much be taking care of all the paperwork. Realtor fees are a standard 3% and you won’t achieve anything by trying to do the purchasing process yourself. The very act of buying a property in Japan is nevertheless nerve-wracking. Most likely what you will be spending in Japan is still substantial compared to overseas real estate. In essence, a million dollars for a shoe-box…

The normal procedure in going into a purchase is that you’ve already talked with several banks, and have a pretty good idea that you will in fact be eligible for a loan. If you’re dealing with Shinsei Bank, right now they don’t do preapprovals, so you might want to get a preapproval from another bank as a back-up, just in case something doesn’t go right or the approvals process takes too long.

Naturally the realtor want you to buy quickly, and if you show even the slightest interest, they’ll be all over you with paperwork, offer acceptances, and other components of the sale. So tell them firmly from the start not to push you until you’re ready. Take your time and see all the properties you need to see, before falling in love with the spot that will be yours for another decade or more.

Once you do decide to buy, you will soon be asked to put down a deposit. My understanding is that while in principle you’re supposed to put down 10%, in fact if the property value is high (JPY100m or more), then simply a meaningful amount of cash to show commitment is OK. The act of making the deposit does commit you to buy, else you forfeit the deposit, but you can load up the purchase contract with conditions such as successfully getting a bank loan from a certain bank (i.e., to get lower interest rate), getting a clean bill of health on the property from the assessor in terms of your ability to build, access it, there being no liens or claims, etc. If any of these conditions falls through, then you get your money back.

However, if the seller wants to back out of the sale because they have another buyer, then they have to pay you 100% (“nibai-gaeshi”) additional “interest” for having inconvenienced you. This is a good feature about Japanese house buying and reduces the likelihood of being “Gazumped” such as happens in in heated markets overseas.

In terms of paperwork, making a deposit requires showing up at the Realtor’s office with the deposit and a variety of forms (hanko, inkan shomeisho, proof of residency or ID, etc.) which the Realtor will give you a list of. You also need the money, which is typically cash, although if you asked for permission to do so, I believe you could also take a bank check. It can feel strange walking around with some millions of yen in cash in your pocket!

One thing you never hear about with Japanese real estate is negotiating the price. For prepackaged land/house deals with large companies, it’s almost impossible to negotiate, but if you’re buying the property off another individual or one of the many buy-and-flip real estate “development” companies, then it is possible. If the amount is large enough, it may also be possible to negotiate the Realtor’s commission down as well – providing of course that he/she is still getting their 3% from the seller, which doesn’t always happen these days.

The land market inside Tokyo is heating up, and competition for vacant land is fierce. Developers employ middlemen (“Jiageya”) to find properties for them, they then buy them, rip down the old dwelling, clean up the property, and put it on the market. Having to pay cash for the land, the developers are usually on the hook for 90% of the property value to Orix or some other financing firm, and thus the interest clock is ticking. Where possible, these guys would rather get in and out fast, and if they can make 5-6% on a development, they’re happy.

Of course the original price asking price is higher, 10% being a typical target profit margin, so what you can do is ask your Realtor to calculate the likely margin the developer is making, and cut it in half, making an offer below that 50% number, then “compromising” your way back up to the 50% over a couple of days of back-and-forth through the Realtor. Naturally this means that you need a cooperative Realtor, so whether you hit on the developer for the discount (easier) or the Realtor, is up to you.

Terrie Lloyd
・・・Investor in Training/

FOREX WEEKLY

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Team Tokyo Forex Weekly
October 25- November 2, 2005

Ode to the U.S Dollar. So that's how it's done!

Is it a miracle that the U.S have miraculously avoided great losses through sheer strength of might?

Here is a more Democratic view and the other side of the coin in our second in the series of 'Ode to the U.S Dollar'.

Jim Rogers, acclaimed author of 'Investment Biker' and 'Hot Commodities' spoke to Julie Sinha and says the best markets are now in commodities.

Jim says that commodities get no respect. Stocks and bonds are losing steam and are moving through a natural cycle. Products such as Gold, sugar, Coffee and Oil are all hot investments right now but there is virtually no interest in trading commodities.

Europe which has the largest combined economy as a whole has very few commodity trading platforms. Stocks and Bonds seem to have stalled and commodites have started to boom.

The U.S government claim that prices for daily consumables are not going up. But the Indexs do not lie and it is obvious that prices are going up. Rogers claims the U.S government is manipulating the numbers in their own statements.

Rogers also claims that the U.S government and the BLS (Bereau of labour Statistics) hedonically adjusts the numbers. Basically they are trying to show us a good time.

He claims that the US government are attempting to devalue the dollar becase of it's international debt. The U.S is the largest debtor nation in the world. Rogers claims that stocks and commodoities average an 18 year cycle and that the current cycle will last for up to 15 years in the future.

Jim's advice in the markets.

The US dollar is in serious trouble because the US currently have debt of up to 8 trillion dollars that averages at an increase of 1 trillion dollars every 20 months. He also claims that there is a lack of education avaliable for 'would be' traders.

The Chinese have allowed the Yuan make a breach of its current position of 3/10 of a percent in favor of Bush's planned visit to China and is poised to be the next best currency the world has to offer.

The Federal Reserve will excellerate its printing of money which will drop the dollar value. Fixed income traders should get out of long term bonds. He claims Greenspan is very rarely right and the bond market topped in 2003 and will be a bad place to settle for the next 10-20 years.

We think that if you are going to do something then you need to talk to one of our traders so you know what is going on.

On October 27 the USD/JPY pair rose to a new 2 year high of 116.23 briefly but was limited below previously mentioned clustered resistance of 116.32/34. A much worse than expected retail sales figure out of Japan of 0.1% didn't fuel any further rallying in the USD/JPY. Instead, USD/JPY fell over 100 points from 116.23 to as low as 115.09 on profit taking. Such development suggests a near term top has possibly been formed and reversal could be around the corner. Much focus will be on worker's household spending. National consumer prices and industrial production data will be released later in the day.

Germany's consumer confidence index rose to 3.4 in October, better than the expected 3.1. A retreat of energy prices and resolutions between political parties for forming a coalition government being cited as the main cause for such increase and this can be viewed as additional sign of steady growth in Germany.

We are expecting a second wave of fundamental effects on the forex market this week. The most important events are the expecting FOMC meeting when US Interest rates change to 4.00% and US Non-farm payrolls data on Friday.

You might be safer opening short positions during the week.

On October 28 the USD/JPY pair stood at 115.67 with a trading range of 114.60 – 116.75 and an upward trend expected. Also expect new record levels above 116.20 during the coming week. Reported by Forex TV.com

Team Tokyo Forex Final Round up.
On Monday 31 the pair closed at 115.71 making use of short positioning saw good profit taking.

As of Wednesday November 2 the USD/JPY did indeed reach 116.81 as anticipated breaking the above records.

View live trading rates at our new page:
http://www.tokyo-forex-japan.com/liverates.html
There is a small delay in time and are considered to be guides only.

View a chart of weekly activity here. USD/JPY

Editor : Jason Bainbridge
[email protected]

YEN WATCH

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Currency	10/24 Mon	10/25 Tue	10/26 Wed	10/27 Thu	10/28 Fri
USD	116.93	116.55	115.96	116.86	116.30
GBP	207.47	206.66	207.77	208.87	208.41
EUR	139.96	139.64	140.64	141.55	141.60
CAD	99.31	98.86	99.24	100.57	99.96
HKD	15.36	15.31	15.23	15.35	15.27
SGD	69.21	69.07	68.90	69.32	69.23
AUD	88.61	88.52	88.88	89.46	89.22

(The above TTS Exchange Rates has been brought to you by the courtesy of GoLloyds TSB)
The above rates were posted at 10:09 on Friday, October 28, 2005 and are valid for funds received before 3:00 pm on Friday, October 28, 2005. All funds received after 3:00 pm are remitted the following day at the following day's exchange rates. The exchange rates provided are intended only as a guide. The Bank reserves the right to apply a different exchange rate if the market is particularly volatile.

EVENT

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No events this week.

JOB WATCH

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- AR Director (Negotiable)
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