The Fallacy of Investors

Sadly, it is only a matter of time before we reach similar situations in the U.S.

JAL seeks 40 percent pension payout cut for survival

TOKYO (Reuters) - Japan Airlines Corp (9205.T) asked retirees and employees on Monday to accept an average 40 percent cut to their pension payouts and warned the struggling airline could face bankruptcy if an agreement could not be reached. 

The cuts will impact 17,000 current employees and some 9,000 retirees.

Meanwhile, more speculation in China:

Chinese are just like New Yorkers. They can't stop talking about real estate.  There's one distinctly American habit the Shanghaiese seem to have picked up easily: talking about money, profits, and real estate prices without self-consciousness. 

The fallacy of investors over the ages has been an expectation that the recent past will extrapolate into the future.  However, real estate like all other investments can be a painful asset to hold as it is one of the most leveraged of investments that individual investors can have exposure to.

The parents, in their 50s, are both longtime employees of Shanghai's public bus company—the husband a middle manager, the wife a retired laborer. Their daughter, Yang Gao, a recent graduate of Fudan University, is going to start work at Ernst & Young next month. They were happy to share details of their personal finances. The Gaos were given the opportunity to buy workers' housing elsewhere in Shanghai very cheaply a few decades ago. That apartment, which they still own and rent out, has soared in value.

When taxi cab drivers, bus drivers and the common man start to benefit and get caught in asset bubbles, it is usually in the last stages.  Nasdaq stocks, Florida real estate anyone?

Just to jog memories, New Yorkers - along with their NJ cousins - were amongst the most aggressive investors in Florida and Las Vegas and in my opinion, responsible for the speculative frenzy that drove Florida into stratospheric valuations.