Historically, it has always been high

Cash position have not increased/improved significantly.

Increment of more than 10% - cash issues?

Gearing/leverage is getting higher. Even before accounting changes.

Seems to be a very normal thing for them to do.

Note that generally, 88,400 pounds = 1 million SEK.

The materiality levels here are (rule of thumb) *0.08 and you get it in million pounds.

Questionable at best.

Only this can be used meaningfully to predict cash flow - trade marks of these kinds of products generally mean very high gross profit margins from exclusivity of sale of goods/revenue from royalties.

Key risk area is the correlation between economic cycles of neighbouring 'European' countries.

Targetted market.

Most likely sold a company in Finland.

Think of the business model as a pure holdings company with many different businesses under it's portfolio.

Capital expenditure heavy with large marketing/dist costs - where there are no economies of scale when it comes to how goods are distributed. In other words, concrete goods distribution.

Irreplaceability.

Exposure to European market is more concentrated = roughly 90% are in European markets.

Key take aways :

• There are differences between profitability and value - just because you provide value, does not mean you will be profitable. Particularly so in a competitive environment. Competition steals profitability. This entails that trying to compete with other people for marginal improvements will not yield big pay-offs.

• Venture investing is always inverse exponential - you don't diversify, you pick the best and you double down.

• Bleeding cash is not necessarily a bad thing - steal market growth. But be sure to steal market growth in one niche area.

• Plan, plan, plan. Backwards plan.

• Is it scalable? Always ask yourself that question.

You are either on the bus or off the bus.

In venture capital, returns are not normally distributed.

It seems that competition and fitting in are values embedded in our day to day lives.

TLDR :

• Japanese youth save a lot - and they are risk averse due to deflationary environments, bad economic news, lack of faith in government to kickstart the economy.

• Low inflation and low growth is not necessarily a bad thing.

• Low inflation and deflationary pressures take place due to low expectations of work force in the economy.

• An aging population could be an issue as well for productivity.

This seems to point to the indicators that part of the problem with low inflation and low growth rates, and lower wage rise rates is partly attributed to the lack of expectations/optimism of a larger portion of younger generation, or shall I say, a youthful and demanding workforce.

It's odd how there is a surplus of workers yet there is weak economic growth. Perhaps there is a shade of worker productivity that we are not considering (i.e., labour contribution and entrepreneurial contribution).

Despite productivity growth, there have been not much economic growth?

Beginning of a low inflation era? I'm going to monitor this thesis.

Note that the way most central banks model target inflation rates, the way they do it is by introducing expected inflation and wage rises into the model as well - it seems to be highly endogenous (i.e., self-fulfilling and have self-reinforcing effects).

The bank's lever no longer works - expectations breed economic reality. No matter what the banks did, it did not matter.

What matters here is the word of the government/the bank - and it seems the less trust there is in the government/bank, the less effective it is - no matter what policy is actually introduced.

It's odd how our economic theories are based on history. There seem to be no concrete first principles that can be used to guide our economical decisions. This highlights that any economic understanding has hidden assumptions and must be questioned thoroughly.

Credit Crunch - A lot more Capital that is not actually generating any income.

Recapitalising banks stabilise them as it decreases the leverage ratio of the bank - and hence, decreases the risk of a bank run due to perception of bank failure.

Note that higher capitalisation allows for banks to take losses better. It also reduces the likelihood of a bank run.

TLDR :

High Leverage -> Most deposits used to give out loans -> If loans are bad, they are not convertible to cash -> As it is highly leveraged, the bank does not actually have much assets after accounting for liabilities (net assets) -> People start freaking out -> They start knocking on the bank's door for fear of a bank's liquidity and solvency - due to perception of bad loans lent out which are irrecoverable, and, high liabilities owed, people knock on their doors (basically the bank's creditors) to get their cash back -> Banks do not actually have enough liquid assets that are not tied to any other creditor obligation to pay these people back -> Collapse.

That is why recapitalisation is important - it introduces asset injection to keep people's mind at peace (preventing a bank run) - and these asset injections come with lesser strings attached (i.e., do not have to necessarily be paid back in full to the capital owner; and most of the time recapitalisation is done via the government - public funds).

Low inflation and interest rates.

The problem with any predictions are that they are based on historical data.

Whilst these conditions are sustainable, any unexpected shocks will only cause up more wreck.

Quality of living is still high, there is still high life expectancy rates.

Main highlights from this article :

• High savings and preservation - even by younger generations - the 20 year olds (younger generation) see their entire life as a 'future of cash-draining emergencies'. They think small and are coldly practical.

• The young generation is experiencing declining prices, and hence, chooses not to spend as much - and hence, this causes prices to decline even more. This is built up from bad economic factors - there are no incentives for young Japanese people to leave home, buy cars marry, have children, take risks and grow up.

• The lesson the young have learnt is that they need to save as much as they can, and take as little risk as possible.

• Topped with the news of failure of governments - so many news on failing to improving working prospects, stop deflation, failure to revitalise economy.

• This has negative impacts on small and medium sized companies - and shifts the sense of rising wealth to the bigger companies and government jobs.

• There is no real market for mid-career recruitment; if you quit your job, the seocnd one is not going to be as good as the first.

• The deflationary generation has had constant flow of horrible information about their economy. “They are being told about people going bankrupt or retiring with no money. They see a welfare system built around lifetime employment which has not adapted to the change. They are told, from a young age, not to be extravagant and when they grow up, not to try to keep up with the Joneses,” she adds.

BUT, the rates of businesses being started is growing again - signs of inflationary expectations again?

This seems to point to the indicators that part of the problem with low inflation and low growth rates, and lower wage rise rates is partly attributed to the lack of expectations/optimism of a larger portion of younger generation, or shall I say, a youthful and demanding workforce.

Despite productivity growth, there have been not much economic growth?

It's odd how there is a surplus of workers yet there is weak economic growth. Perhaps there is a shade of worker productivity that we are not considering (i.e., labour contribution and entrepreneurial contribution).

Beginning of a low inflation error? I'm going to monitor this thesis.

Note that the way most central banks model target inflation rates, the way they do it is by introducing expected inflation and wage rises into the model as well - it seems to be highly endogenous (i.e., self-fulfilling and have self-reinforcing effects).

The bank's lever no longer works - expectations breed economic reality. No matter what the banks did, it did not matter.

What matters here is the word of the government/the bank - and it seems the less trust there is in the government/bank, the less effective it is - no matter what policy is actually introduced.

It's odd how our economic theories are based on history. There seem to be no concrete first principles that can be used to guide our economical decisions. This highlights that any economic understanding has hidden assumptions and must be questioned thoroughly.

Credit Crunch - A lot more Capital that is not actually generating any income.

Recapitalising banks stabilise them as it decreases the leverage ratio of the bank - and hence, decreases the risk of a bank run due to perception of bank failure.

Note that higher capitalisation allows for banks to take losses better. It also reduces the likelihood of a bank run.

TLDR :

High Leverage -> Most deposits used to give out loans -> If loans are bad, they are not convertible to cash -> As it is highly leveraged, the bank does not actually have much assets after accounting for liabilities (net assets) -> People start freaking out -> They start knocking on the bank's door for fear of a bank's liquidity and solvency - due to perception of bad loans lent out which are irrecoverable, and, high liabilities owed, people knock on their doors (basically the bank's creditors) to get their cash back -> Banks do not actually have enough liquid assets that are not tied to any other creditor obligation to pay these people back -> Collapse.

That is why recapitalisation is important - it introduces asset injection to keep people's mind at peace (preventing a bank run) - and these asset injections come with lesser strings attached (i.e., do not have to necessarily be paid back in full to the capital owner; and most of the time recapitalisation is done via the government - public funds).

Low inflation and interest rates.

The problem with any predictions are that they are based on historical data.

Key Takeaways :

• Interest rates effect businesses performances.
• Valuing a company is key as it gives you an indicator on whether you are buying it at a good price.
• Booms and Busts of Interest Rates - when interest rates are low, businesses that rely on credit to fund their working capital performs well - but this eventually slows down as interest rate increases.
• Save more - your earnings don't matter too much.
• Benjamin Graham's book's valuation techniques are mainly for growth picks.
• Speculating is relying on earnings on going better than it currently is, investing is looking for companies that are doing well and letting it continue what it currently already is doing.

It's odd how this convention is not clearly true anymore - during COVID, there were induced recessions but the stocks are still highly priced.

Technically, a high PE ratio is equivalent to a high discount rate applied - if you are applying a high discount rate, you bet your ass you better be sure that the company's growth rate is higher than your discount rate.

Always think in terms of opportunity costs.

Depends on exposure to interest rates.

Focussing on capital allocation, rather than how it has been misallocated.

It seems the clear market signals are, if interest rates are jacked up for sovereign bonds (i.e., government issued debt), there are signs of danger.

TLDR :

Deflation in Japan did not affect Japan's economy and people's lives too negatively - the downside effects of this were not too bad. But, to move away from the downside and back to the upside is hard.

High income countries with market principles (free market principles) and strong welfare systems can fight off degrowth with sustained fiscal stimulus.

This can be funded with public debt to the markets without investors asking for higher rates.

People are very pessimistic - heck, they don't even ask for a pay raise. https://www.ft.com/content/0895c4ee-eb3b-11e5-888e-2eadd5fbc4a4

Generally, when you decrease interest rates, expansionary measures kick in - cheap money floats around in the economy. But Japan's economy has not kickstarted despite that.

Oddly, the cheap credit did not fuel asset price bubbles - which is what you would expect.

Capital expenditures of a given country.

Wikipedia : Debt overhang is the condition of an organization (for example, a business, government, or family) that has existing debt so great that it cannot easily borrow more money, even when that new borrowing is actually a good investment that would more than pay for itself.

TLDR : You are so in debt that you can't even renegotiate your loan even when its beneficial for you to do so.

Abenomic reforms for corporate practices and trade :

Corporate governance reform Easing of restrictions on hiring foreign staff in special economic zones Making it easier for companies to fire ineffective workers Liberalizing the health sector Implementing measures the help domestic and foreign entrepreneurs. The proposed legislation also aimed to restructure the utility and pharmaceutical industries and modernize the agricultural sector. Most important, perhaps, was the Trans-Pacific Partnership (TPP), which was described by economist Yoshizaki Tatsuhiko as potentially the "linchpin of Abe's economic revitalization strategy," by making Japan more competitive through free trade.

Taken from investopedia*.

Zombification are simply firms that have a low net asset ratio where they simply cannot pay back the main 'principal amount' of their loan (the lumpsum amount), but can keep paying back the interest.

This more than often indicates that the company barely has enough working capital to keep generating margins that can allow them to service the loan and keep it going; but they do not have enough capacity/are too capital constrained to actually gain more capital to expand/pay-off their liabilities in full.

Supply-side enhancing stimulus is simply jargon for labour and business output push (instead of your typical demand side, which is to increase spending power of consumers).

Signs that Japanification did not necessarily adversely impact the Japanese economy.

History :

1973 - Japanese monetary authorities decide to let the yen float freely against the dollar, and the yen appreciates as far as 263 to the dollar.

1978 - The yen pushes through 200 to the dollar for the first time, strengthening as far as 177.

1980 to 1985 - The yen’s appreciation halts and partially reverses despite Japan’s big trade surpluses. Higher interest rates in the United States prompt Japanese investors to put money in dollar assets.

1985 - The Group of Five industrial nations, the predecessor to the G7, sign the Plaza Accord in which they agree the dollar is overvalued and to weaken it. The yen climbs from its pre-accord level of around 240 to 211 in October and 200 in November, a 20 percent rise in just a few months.

Why this is odd:

Theoretically, strengthening the yen should give Japanese consumers and businesses to re-consume again - and purchase more goods from the international market (particularly US), but it seems that this did not work.

What is so special about this graph is that generally, economic theory purports that as deficits are accumulated, yields (expected returns) from investors will be higher as investors perceive more risk from a government that is accumulating more deficit.

But as from this graph, bond yields have not increased despite Japan's growing deficit due to these supposed reasons :

Belief that the government will be able to service their debt payments, and the risk of the Japanese government defaulting is low.

TLDR - investors see Japanese government as reliable.

Views on a low growth economy - due to expectation of low inflation, and, lower growth rates, other investment options (i.e., equities, other alternative investments) are not seen to be as being higher yield - and hence, investors still flock to Japan government bonds which presses the interest rates down (i.e., because there are no other attractive opportunities, investors are looking to buy more of these bonds as they still look attractive).

Not pumping in money to the economy through government spending via projects, tax rebates etc. etc.

Focussing on capital allocation, rather than how it has been misallocated.

It seems the clear market signals are, if interest rates are jacked up for sovereign bonds (i.e., government issued debt), there are signs of danger.

High income countries with market principles (free market principles) and strong welfare systems can fight off degrowth with sustained fiscal stimulus.

This can be funded with public debt to the markets without investors asking for higher rates.

TLDR :

Deflation in Japan did not affect Japan's economy and people's lives too negatively - the downside effects of this were not too bad. But, to move away from the downside and back to the upside is hard.

People are very pessimistic - heck, they don't even ask for a pay raise. https://www.ft.com/content/0895c4ee-eb3b-11e5-888e-2eadd5fbc4a4

Generally, when you decrease interest rates, expansionary measures kick in - cheap money floats around in the economy. But Japan's economy has not kickstarted despite that.

Oddly, the cheap credit did not fuel asset price bubbles - which is what you would expect.

Capital expenditures of a given country.

Wikipedia : Debt overhang is the condition of an organization (for example, a business, government, or family) that has existing debt so great that it cannot easily borrow more money, even when that new borrowing is actually a good investment that would more than pay for itself.

TLDR : You are so in debt that you can't even renegotiate your loan even when its beneficial for you to do so.

Abenomic reforms for corporate practices and trade :

• Corporate governance reform
• Easing of restrictions on hiring foreign staff in special economic zones
• Making it easier for companies to fire ineffective workers
• Liberalizing the health sector
• Implementing measures the help domestic and foreign entrepreneurs.

The proposed legislation also aimed to restructure the utility and pharmaceutical industries and modernize the agricultural sector. Most important, perhaps, was the Trans-Pacific Partnership (TPP), which was described by economist Yoshizaki Tatsuhiko as potentially the "linchpin of Abe's economic revitalization strategy," by making Japan more competitive through free trade.

Taken from investopedia*.

Zombification are simply firms that have a low net asset ratio where they simply cannot pay back the main 'principal amount' of their loan (the lumpsum amount), but can keep paying back the interest.

This more than often indicates that the company barely has enough working capital to keep generating margins that can allow them to service the loan and keep it going; but they do not have enough capacity/are too capital constrained to actually gain more capital to expand/pay-off their liabilities in full.

Supply-side enhancing stimulus is simply jargon for labour and business output push (instead of your typical demand side, which is to increase spending power of consumers).

Signs that Japanification did not necessarily adversely impact the Japanese economy.

History :

1973 - Japanese monetary authorities decide to let the yen float freely against the dollar, and the yen appreciates as far as 263 to the dollar.

1978 - The yen pushes through 200 to the dollar for the first time, strengthening as far as 177.

1980 to 1985 - The yen’s appreciation halts and partially reverses despite Japan’s big trade surpluses. Higher interest rates in the United States prompt Japanese investors to put money in dollar assets.

1985 - The Group of Five industrial nations, the predecessor to the G7, sign the Plaza Accord in which they agree the dollar is overvalued and to weaken it. The yen climbs from its pre-accord level of around 240 to 211 in October and 200 in November, a 20 percent rise in just a few months.

Why this is odd:

Theoretically, strengthening the yen should give Japanese consumers and businesses to re-consume again - and purchase more goods from the international market (particularly US), but it seems that this did not work.

What is so special about this graph is that generally, economic theory purports that as deficits are accumulated, yields (expected returns) from investors will be higher as investors perceive more risk from a government that is accumulating more deficit.

But as from this graph, bond yields have not increased despite Japan's growing deficit due to these supposed reasons :

• Belief that the government will be able to service their debt payments, and the risk of the Japanese government defaulting is low. TLDR - investors see Japanese government as reliable.

• Views on a low growth economy - due to expectation of low inflation, and, lower growth rates, other investment options (i.e., equits, other alternative investments) are not seen to be as being higher yield - and hence, investors still flock to Japan government bonds which presses the interest rates down (i.e., because there are no other attractive opportunities, investors are looking to buy more of these bonds as they still look attractive).

Not pumping in money to the economy through government spending via projects, tax rebates etc. etc.