Empowering Women in Financial Markets: Unveiling the Mrs. Watanabe Phenomenon | Ask My Man Manny Podcast

What if everyday decisions made by Japanese housewives could influence global financial markets? Join us as Manny Henson and Dr. Abby Durkin uncover the astonishing impact of these unsung financial strategists during the late 1990s. You'll learn how these women, traditionally responsible for managing household budgets, masterfully navigated Forex and carry trade to turn a strong yen into a household asset. Discover their significant yet often overlooked contribution to the Japanese economy, especially during times of quantitative easing implemented by the government.

We then shift our focus to the groundbreaking economic policies of the late Prime Minister Shinzo Abe. This segment highlights the "Mrs. Watanabe" phenomenon, where average household financial decisions, particularly those made by women, have begun to democratize financial markets. Through a discussion on the evolution of brokerage fees and the importance of self-education in trading, we delve into how understanding market dynamics and risk management can empower anyone to make smarter financial decisions. 

In our final segment, we tackle the complexities and risks of international financial strategies, taking you through the precarious scenario of borrowing in yen to invest in the Russian ruble. Understand how brokers' responses to the Russian government default led to significant financial upheaval, and why robust risk assessment is crucial. We underscore the growing involvement of women in financial planning and advocate for enhanced financial education to bridge the wealth gap. Tune in to equip yourself with knowledge and insights to navigate the financial world more wisely and responsibly.

Chapters

• 0:06 Empowering Women in Financial Services
• 10:24 Financial Literacy and Women's Impact
• 18:38 Understanding Financial Risk and Empowerment
• 29:39 General Financial Education Disclaimer

Transcript

Speaker 1: 0:06

That is. That's my takeaway. I love the idea that women are more empowered by the democratization of financial services and the reduction reducing of commissions and costs that has happened over the last 50 years. It's a great opportunity for people to educate themselves and get more control over their futures.

Speaker 2: 0:32

The content presented and discussed is purely intended to be general and educational in nature and should not be construed as specifically tailored investment, financial planning, tax, legal, psychological diagnosis or other professional advice.

Speaker 1: 0:48

Hello, hello, hello. Thank you all for joining us. This is Manny Henson from Ask my man, manny, along with Dr Abby Durkin, we have an interesting subject to talk about today, and that is about and I'll let you, I'll let you describe it as kind of a really unique situation.

Speaker 3: 1:09

Yeah, I was actually really inspired by what we talked about last time, which was featuring women and wealth and the new place in power that women are occupying in the financial space, and so, naturally, you know how we all do we just kind of fall down rabbit holes on the internet, and in my nerddom I was following along.

Speaker 3: 1:33

There's a great YouTube account, phineas tons of good financial information, and there was a feature in there that really piqued my interest because I live here in Japan and he was featuring says how Japanese Housewives Outsmarted Global Finance, and it's about Mrs Watanabe, and Mrs Watanabe is not a real person, it's a term like used, kind of like John Doe it's the fifth most common surname here in Japan and what happened was back in 1999, japan had an economic situation and, unlike the US, most of the household finances here in Japan are controlled by women, and it's customary once a couple gets married that the wife in here they control the finances, and this is a substantial, substantial sum that is represented across the GDP.

Speaker 3: 2:31

It's estimated that the housewives alone in Japan, they manage $12.5 trillion in household assets. Something else that sets Japan apart from the US is the cash on hand, and so the savings culture in Japan is quite different, and so in the US only about cash on hand is about 14%, whereas in Japan it's 54%. Cash on hand goes into savings, and so, when Japan was doing well, they dropped the interest rates and they were basically relaxing the economy to some degree to stimulate it and to stimulate growth. But what that did is the housewives of Japan, who were monitoring their money very closely. They became kind of frustrated because their savings weren't growing, it was not yielding anything in their returns, and so they got curious and they started looking around and they realized that, while the yen was strong, other currencies were struggling, and so what they realized they could do is they started to dabble in Forex, and for those of you who don't know, can you describe what Forex is?

Speaker 1: 3:41

Yeah, and it's a good segue to what I was thinking in that a lot of people want to do things that are different to generate some income where they're not necessarily actively involved in it. It's certainly a good reason to consider investing some extra cash, so carry trade in Forex. It really comes down to economic principle that the same thing cannot be different prices in two places at the same time. So stick with me on this part. So let's say if you know handbags, what's your favorite bag, type of bag, bag maker? You know what will happen is you know what are women buying these days? I don't know Like what type of bag.

Speaker 3: 4:35

I mean the standard luxury brands. You know that's, that's pretty common to see in the upmarket areas, especially in Genza. You know we have Prudy and Gotcha, prada and Gucci. You know all the normal things.

Speaker 1: 4:51

You know. So most people really don't look at the differences in prices between those things. But if you're an entrepreneurial person, you would look at the difference of one place for that bag, that Prada bag, whatever case Gucci bag, whatever case Gucci belts I don't know why. Gucci belts is something I have, for some reason.

Speaker 3: 5:12

It's in a song, I think.

Speaker 1: 5:14

You would buy it at one place and then you would sell it in the place at the higher price, and companies are exactly the same way. Why do currencies have different prices? To begin with, it's really one of two things differences in interest rates and then the rate of inflation or projected rate of inflation, and all those three things kind of coming in currency prices, inflation and rate of growth. They're equalizing over some period of time. But somebody's got to take out that trade, that arbitrage, and so, when it comes to with currencies at different prices, you would borrow in one location where there's low interest rates and then you would buy currency and a place where there's a higher interest rate and hopefully, if that the train, the change in currencies, don't change against you too fast, you can sell that loan in the future and then convert it back to your local currency and you would net a profit.

Speaker 3: 6:26

and so, yeah, that kind of the carry trade in in a nutshell yeah, and that is what the that's what the japanese housewives of japan back in the 90s figured out, and so they started doing this across the country, and it had a massive impact for the good in terms of the economy. Initially because they were doing exactly that they were taking a stronger currency and then they were selling it and investing it in weaker currencies and Russian financial crisis, and it changed the dynamic. The geopolitical climate changed tremendously, and those investments that they had made in those foreign currencies they came to collect back, and so then that kind of threw the whole system into chaos, system into chaos. So they weren't one to go down without a fight, of course, and so they kept at it. They were tenacious and they stuck with it and they ended up working a little bit more with the government of Japan that implemented quantitative easing. And for those who don't know I know I'm throwing a lot of big terms, but you're the financial gurus Can you describe what quantitative easing is?

Speaker 1: 7:43

Yeah, quantitative easing is something that a lot of people are starting to be aware of, especially in America over the last 15 years or so, and the idea is, when household balance sheets and business balance sheets aren't doing very well, aren't doing very well, the government can stimulate and help people unwind those loans that aren't very appealing by buying different assets. Now, in most of the cases, the last hundred years we all know the Federal Reserve they simulate the economy and they quantitatively ease Right by buying government bonds, right, and so the the government has a budget deficit and they have different things that they want to invest in, and so that's basically the assumption is it helps everybody, because the public job you know public is on a hook for for every that the US government owes, and so maybe that's a little bit easier to sell, to stomach politically. Federal Reserve then buys who's in charge of managing inflation and growth, buys government debt at a price point that lowers the current yield and different yields that are measured against it, and so it's a way to pump cash into the economy, generate demand and then roll the economy over, and that's kind of, in a short scale, short, how it all works.

Speaker 1: 9:24

Japan is a little bit different. So not only are they looking at government bonds, they will buy real estate, they will buy gold, they'll buy currencies of other countries. They have a budget surplus, balance sheet surplus, and so they were able to buy assets globally and not just their government's bond. And so that's how they kind of improved inflation expectations. And inflation expectations means people are investing more, raising prices, higher prices, aggregate demand, increased growth. Increased growth allows people to get higher paying jobs, allows people businesses to pay those higher paying employees, and then you can unwind your portfolios, unwind leverage you have in your own balance sheet as an individual, and so you know. That's kind of how it worked.

Speaker 3: 10:21

It was bringing us into Abenomics. So Shinzo Abe, the late prime minister of Japan, when this was going on, he implemented a number of these strategies and it was kind of a crisis move on his part to bring the economy back into some kind of regulated state and that led to deflation of 2% and that brought in a tremendous amount of fiscal stimulus, which he did. He invested in education and health care and the Nikkei here shot up 30 percent in the first few months and because the Mrs Watanabe phenomenon had been well known, by this point on Wall Street, they were like welcome back, mrs Watanabe, because everybody had been watching what was going on in Japan as that, as our economies become more globally connected, as our economies become more globally connected, that was never so evident before, but one of the reasons why it was catching my eye so much is because this was both carry trades as well as quantitative eating, came from Japan and were inspired by the influence and the impact of the average housewife in air quotes, and I was tremendously inspired by that as a woman in Japan that manages the household finances myself, and one of the quotes that I loved from this particular YouTube was that this led to a democratization of financial markets, and I thought what better way to explain the impact that women globally are having in finance as truly starting to democratize things? And I highlighted that to me because we've been talking a little bit about the impact that women are having in their personal financial choices. But those personal financial choices just like the Mrs Watanabe at the 90s of my savings, isn't growing enough. What can I do about it to improve my family's financial situation? Those conversations that women have within their own minds about their own household finances are driving markets. They're driving change and I find that tremendously empowering, you know, and of course, there's ups and downs, like when they were talking about the Russian financial crisis as well as other things that have had massive global financial impact.

Speaker 3: 12:39

People who are playing in those fields are going to have those consequences. It's not like we're suddenly immune one minute. You know this is a. It's a process, it's a cycle and Warren Buffett talks about quite a bit, but the idea that the average household, the average household has this ability to have real economic impact when, especially when they are the ones that are in control of the finances, they're the ones watching it. So, regardless, I think, of your role in your family, whether you're the ones watching it. So, regardless, I think, of your role in your family whether you're the husband or the wife or your spouse, depending on your financial and family arrangements the person that is really the closest monitor of the family finances has tremendous impact in where that money goes and how it's used. And I was wondering, across your client base, if you've noticed anything like a trend in women, for example, wanting and seeking out more financial advisors.

Speaker 1: 13:40

Yeah, manny, and I would. I would say I would say the biggest thing is three things that I take away ways from this. This whole conversation and yes, that's to answer your question directly is, yes, there there is that group of people, a wider group of people, are just saying you know, look, I want to take more control over things, I want to be, I want to create more predictability in my life, and a lot of women are driving that conversation. I I don't have the exact number, but I would probably say, you know, more than half of my clients are, are female single member households or they're not. You know that they there's, they're couples where women are definitely active and they're, they're asking questions and they're really, really interested in the coincidence about the economy and how all this stuff works.

Speaker 1: 14:32

And I think, really I think everything kind of happened in the 50s, you know, prior to the 70s, prior to the 70s, brokerage fees and commissions were signed a specific amount and so every broker had an incentive to grow and educate themselves and you couldn't get a different price on commissions for transactions. Everybody paid the same amount and then there was a democratization of that expense, of that whole process, where brokers could then compete on price and so when you have that competition, instead of clients paying hundreds of dollars per trades and that's really realistically how it was I mean it sounds like it was a long-term time ago but up until 10 years ago, the idea that you would have zero commissions was ridiculous. You had back in the 70s, prior to the 70s, a lot of people who were getting those jobs or brokerage jobs were really educated and you beat your other broker out by over-educating your clients and coming to them with the deals. Now that there's a lower expense lower expense of changing course a lot of people started educating themselves, maybe thinking like, oh, maybe I could save some money, educate myself, trade, and so I would think that's overall a positive thing.

Speaker 1: 15:59

The challenge with it is complex, subject very fast and just have a cursory understanding of it and microeconomics and that markets, how market dynamics work and how they shift and adjust. Most people who are looking at trades maybe they're looking at a chart, maybe they're looking at a couple of minutes inside of a trader at a time when you're looking at the trend over long periods, those anomalies, that arbitrage should go away. And so you have to be very emotionally mature to say to yourself. Look when these trades are not working or the overall landscape economic landscape isn't conducive for this particular type of trade, I'm going to stop trading. A lot of people can't do that. I'll say like 93% of traders lose money overall after expenses. It's a tough thing to do, but it's definitely worth exploring and understanding the dynamics of trading.

Speaker 1: 17:06

The last thing I was thinking about is the lack of understanding on risk. I've been a broker for a long time and I would never surprise people. It never ceases to amaze me how many people will call me up and they'll be like, hey, you unwind me out of my tree. I don't understand like this. You owe me money when it comes to your mortgage, right? You understand, like the day you move in, you're going to have about 5% to 20% and 25% of the type of real estate investment you have. We understand that type of leverage from that perspective, and the only leverage you need to know about and the only equity you need to worry about on that only specific day is the day you go into a position when you're looking at trades in investments and financial securities. That's just only the start. So you have an initial margin and whether you're talking about Forex, you're talking about options, other types of derivative products. You have an initial margin which in most cases is 50%. That does change by the Federal Reserve. The Federal Reserve can change that. They can change that while you're in your position and we could also increase what they call excess maintenance margins intraday and you have to come up with the new money over time and within time we can sell you out and that's all written in your legalese brokerage agreements with every single broker there is.

Speaker 1: 18:38

So what happens is you look at the Russia incidents. There's someone that was at the Japanese brokers that were looking at the increase in risk of people borrowing in yen and investing in Russian ruble and they're saying, okay, look, the Russian government might default. And actually they ended up defaulting. They then all brokers not just Japanese brokers, brokers, the companies all across the world and in your agreement they say well, if we believe the risk of certain positions are higher, we can increase that initial maintenance margin for 20, 30, 40, 70%. I've seen margins above the overall dollar amount of what you would have to pay if you were paying dollar for dollar for your position. That can happen. That's not illegal. That actually does happen occasionally. In that morning one day the broker-dealer just says all right, we're adding an excess margin of 30%, so it went from 50% to 80%. You have until three or four o'clock to come up with the money in your account, or we're selling you out.

Speaker 3: 19:57

Yeah, that's exactly what happened. So they had to cash out in 20 and 2013,. This particular strategy took a real tumble here and unfortunately, people lost, you know, their entire family net worth in these situations where the ones that came to collect they did and they forced this cash out. And so then there had to be this pivot and this is all like kitchen table stuff, you know like there had to be a pivot into that exact thing that you're talking about, which is this risk assessment. You know it's not. It was like easy come, easy go.

Speaker 3: 20:34

And when people are just starting out with these financial strategies, you know there's a lot of momentum, there's a lot of excitement, but it's really difficult in forecasting to truly understand the risk and the more players you have. You know, like here in Japan, when Mrs Watanabe said, oh, I'm going to take yen, I'm going to invest in other currencies as soon as they introduce that second, third, fourth country, that second, third, fourth player, into the mix, the risk increases with every single one of those additions and the vulnerability to that cash out nightmare scenario increases. And so it, you know, a very hard lesson learned. You know there's a phrase out there that learning is painful. There's a lot of very painful lessons learned, but it's. There was a lot of very painful lessons learned, but it's, it's. We're still going strong in the sense that women are still leaning forward into these financial conversations and they are still setting trends and changing markets just by being curious. And one of the things you said I was really excited about was that over half of your clientele are women and that is so empowering to me because they are putting themselves in those positions again of asking the right questions, of informing themselves and potentially by engaging with, you know, financial expert planners like you. That's their way of minimizing these risks.

Speaker 3: 22:01

Because we all get curious, we all see the clickbait, you know, we all think, oh, I can, you know, do this. And next thing, you know, you're stuck in an MLM and that's not a good thing, you know. You know like I'm really encouraged that so many are so many women specifically are coming into the financial space to see what they can do. That it's this dissatisfaction with just sitting back and watching your savings do absolutely nothing, and maybe it's a change of life that has brought them in. It's like, okay, we're approaching retirement or okay, my job suddenly changed or my financial goals changed or there's a medical situation, or I have an inheritance to manage. These spark, these conversations that people don't normally have, you know, and I'm delighted that women are in the room and that they're actually making the calls and that I mean I'm just thrilled. I'm thrilled by that.

Speaker 1: 22:57

Yeah, no, I definitely think it's all for the positive. I think understanding how we all manage our own households, how money works, how investments works, is important for everybody. We have, unfortunately, a huge disparity in wealth and income for retirement age women and men in America, and so we have to figure out a way to break that gap. And you're looking at Social Security trusts, the Medicare trusts, the safety nets that are important for every retiree and the stability of those safety nets getting weaker and weaker over time, and so we got to figure out a way to bridge that. For part of the starting start, part of that is starting where it all begins and making sure that we're holding, we're holding our businesses, are accountable for equal pay for equal work. And then the other part of that is making sure that we're all educating ourselves. Or you know, our sisters, our aunts, are your mothers. Yeah, we encourage our friends, they encourage our friends to get educated, and there's so many different choices out there.

Speaker 1: 24:12

The big I think big takeaway of any kind of new strategy or strategy that involves a lot of risk is educating yourself about those specific risks and incising your bet. You wouldn't take a strategy that is highly volatile and put every single dollar that you own into that Game stock is a classic example of how it can go wrong. Example of how it can go wrong. You saw a lot of people recently and that was, I think, the most recent trade that people got ahead of. I've heard people mortgaging their homes and buying stock in GameStop.

Speaker 1: 24:55

It got absurd at a point and you didn't know why you had this fear of missing out. You got to maintain your risk management strategy. You should know, and as professionals manage risk, there's a limit to how much they will ever put in any particular good idea or even great idea, and so, as an individual, you need to do the same. All right, maybe I have a really great idea. It's going to require some leverage and you're looking at day trading. You only want to put a certain percentage of your money in there. If you lose that, you don't just go and add back into it. It's like gambling for some people, unfortunately.

Speaker 1: 25:38

Yeah, you know the phrase only play with what you can afford to lose comes to mind right.

Speaker 3: 25:40

Only yeah, only play with what you can afford to lose. Comes to mind right, yeah, only play with what you can afford to lose.

Speaker 3: 25:47

But when you're talking about risk or entertaining a new strategy, a new way of doing things, people sometimes don't even make that first calculation correctly of what can they afford to lose, because they don't foresee that the risk could actually take more than they've put on the table, and being able to have those conversations to get a better assessment of the financial landscape, you know someone like you who can really flip the rocks over and point out the bugs and the worms where people are just seeing a field of flowers is so important.

Speaker 1: 26:23

It's like grapes to wrath, like, yeah, the opportunity is there, like the people who get to that opportunity early are there. In the journey to getting there, you don't want to lose everything. You want to have a broadly diversified portfolio that's unfortunately slow but less exciting, but predictable over longer periods of time, and then dabble in areas that you feel like you're knowledgeable enough of that you can gain knowledge in, and so that's my takeaway. I love the idea that women are more empowered by the democratization of financial services and the reducing of commissions and costs that has happened over the last 50 years. It's a great opportunity for people to educate themselves and get more control over their futures.

Speaker 1: 27:20

The other part of that is you understand how leverage works. In my world, the brokerage world, leverage is not the way you think. It is any other area of leverage. When you buy your car, note what you owe, what you'll pay and what you have to lose is defined. Everything you have outside the consumer debt markets is pretty much defined the day you enter into those contracts Financial services, derivatives, margin, anything requiring margin. That changes, and so you want to be prepared. You have the ability to lose more than what's in your account and so any kind of loan type of application, and so education is a risk.

Speaker 1: 28:11

Manage those well. Don't do things that you don't understand, and I think that's kind of summed it up. Any other takeaways? Anything from an emotional, psychological standpoint.

Speaker 3: 28:23

Well, you know, all over social media, people are talking about dopamine and the role of that in adrenaline, and so when something excites you, there's a lot of good that can come from that, but it should be tempered with information as well. So I'm all about forward leaning and creative thinking, especially when it comes to women in finance, but I'm also 100% for educating oneself on, like you said, people not necessarily understanding that they could lose more than what's in their account, and I think that's probably one of the strongest takeaways for me. That was maybe a miscalculation in some of these other strategies that when the cash out comes, it might require more of you than your initial investment. So thank you for that.

Speaker 1: 29:14

Yeah, I will leave it there. Thank you all for joining us as another. This subject is kind of deep and I appreciate appreciate everybody who was able to stay with us and hopefully you got something in the end. Until next time, I hope you have a great time and happy investing.

Speaker 2: 29:39

The content presented and discussed is purely intended to be general and educational in nature and should not be construed as specifically tailored investment, financial planning, tax, legal, psychological diagnosis or other professional advice. Any data cited is valid as of the date of presentation, but please know that such data are frequently subject to change. Any investment performance referenced is purely past performance, which is no guarantee of any future performance. Nothing contained in this course should be construed as an offer to sell, a solicitation of an offer to buy or a recommendation of any security or other financial product or investment strategy. All investment tax and financial planning strategies involve risk that you should be prepared to bear. Investment, financial planning, tax, legal and other professional advice is specific to each individual and entity.