Sign In
SHARE
Learning From Japan
Has there been a more demoralizing and disappointing major stock market, over the course of the past 20 years, than Japan's? It reached its nominal all-time high of 38,957 in December 1989; it closed today at 8,693, just 800 points or so north of its 2003 low.
The plight of Japanese shareholders is germane to anybody thinking of buying stocks today. Japan's companies are well-run, and its financial institutions, as we saw with the MUFG deal, are today more part of the solution than they are part of the problem. And yet, as Tim Price notes,
the entire Japanese stock market is left trading close to book value at levels, in real terms, equating to where it traded in the early 1970s.
Japan, of course, knows what it's like to go through a credit crisis and a vicious deleveraging -- and it's had two decades to reconfigure itself into a viable post-crisis economy. Which is not to say that Japanese stocks are a screaming buy right now, but which is to say that if you think that stocks in the US are cheap, maybe you could look across the Pacific and find some equally-attractive assets which are even cheaper. Or, to put it another way, the lesson of Japan is that even cheap stocks can continue to decline for decades.
The US will never again drive the global economy in the way it has done for the past 60 years, and the presence of multinationals on the Dow does not make it a proxy for world stock-market performance. Japan still accounts for a large chunk of global economic activity; it might makes sense, if you're not invested there already, to rotate some small part of your funds into a country which learned many painful lessons over the course of the 1990s. Assuming, that is, that you still have any faith at all in equities as an asset class.
Loading...
Thank you for registering as a Portfolio.com Insider. Your comment has been added.
Create Your Public Profile
- The Times' Rorshach Geithner Story
- Apr 27 2009 9:26AM EDT
- Sinking Animal Spirits
- Apr 27 2009 8:45AM EDT
- Counter-cyclical Urban Policy
- Apr 26 2009 10:00AM EDT
- Be Your Own Counterfeiter
- Apr 26 2009 9:36AM EDT
- Being Tim Geithner
- Apr 25 2009 12:37PM EDT
- Notes From a Press Conference Naif
- Apr 25 2009 9:41AM EDT
- What Good is the News?
- Apr 25 2009 8:32AM EDT
- Stressful Enough
- Apr 24 2009 2:29PM EDT
- Not Regretting the Pound
- Apr 24 2009 1:09PM EDT
- Introducing the New Ford Squeeze
- Apr 24 2009 9:47AM EDT
- Non-Economic Questions of the Day
- Apr 24 2009 9:12AM EDT
- The Stress Test Blind Alley
- Apr 24 2009 8:36AM EDT
- Happy Hour
- Apr 23 2009 9:40PM EDT
- Recovery Without Rebalancing
- Apr 23 2009 6:13PM EDT
- The Shape of Your Recession
- Apr 23 2009 5:11PM EDT
Archive
Categories
Links
- Email Ryan Avent
- Econospeak
- Financial Crookery
- The Epicurean Dealmaker
- Naked Capitalism
- Alphaville
- Marginal Revolution
- The Panelist
- FP Passport
- Overcoming Bias
- Andrew Leonard
- Barry Ritholtz
- Brad Setser
- Carbon Tax Center
- Calculated Risk
- Greg Mankiw
- Free Exchange
- Dean Baker
- Alexander Campbell
- Kash Mansori
- The Bayesian Heresy
- A Fistful of Euros
- John Quiggin
- Michael Mandel
- Lance Knobel
- Mark Thoma
- Dan Gross
- Curbed
- Streetsblog
- Chris Anderson
- Deal Journal
- MarketBeat
- DealBook
- DealBreaker
- Carl Bialik
- Michelle Leder
- Brad DeLong
- Ultimi Barbarorum
