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Mix-Ansicht- JAPANESE POST-BUBBLE REPLAY? - leibovitz, 19.08.2002, 18:08
JAPANESE POST-BUBBLE REPLAY?
-->A stock market bubble peaked in Japan in late 1989. The market then dived 63.2% and has since had a series of bull and bear swings, but basically it has stayed on the defensive since then. What are the chances the U.S. is now doing a Japanese post-bubble replay?
Let us look at the pluses and minuses of a post-bubble comparison of the U.S. versus Japan. The positives are threefold: (1) Japan had both a real estate and a stock market bubble. Our stock market bubble might be fully comparable but we think our housing bubble is minor compared with the incredible real estate surge in Japan. (2) Our economic system is more open and
competitive than the managed and intertwined Japanese system. This more free market economy may be better able to adjust to the bubble fallout and, (3) perhaps the biggest positive is that our central bank was able to watch and learn from the Japanese deflation, and thus we have moved much faster than Japan in lowering our discount rate and cutting taxes. The main negatives
are only two-fold but very powerful: (1) the Japanese are big savers while households in the U.S. love to borrow and spend and, (2) Japan runs a huge trade surplus as they favor production over consumption and the U.S. runs a record trade deficit and is the largest debtor nation in the history of the world. My conclusion is that looking at the Japan bubble aftermath is a legitimate and
even necessary step in trying to see what will happen in the U.S. in the years ahead.
More good and bad news in looking at the aftermath of the Japanese and U.S. bubbles. The good news is that the Nikkei in Japan plunged 63% from 1989 to 1992 while the S&P 500 has"only" plunged 48%, keeping alive the hope that we are at less risk (as shown on chart DAVIS6A below). The bad news is that the NASDAQ Composite plunged 76.1%, which is worse than in Japan, as shown on DAVIS6. In conclusion, the post-1989 Japanese experience is just one in a number of secular bear market paths we have studied. What this study and the others teach us, in my opinion, is that this is not a buy-and-hold market, but rather a buy-and-sell market and could stay that way for a rather long time. --Ned
P.S. Despite longer-term caution, the short-term outlook is still developing in a bullish fashion as shown on NDRII SM 1 on page 2. Note the prior two buy signals only had short-term significance.
<ul> ~ http://www.ndr.com</ul>
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