How can Nikkei 225 not recover after so many years?
- Thread starter tyrant
- Start date
achilles28
Good question!
The answer comes down to nominal value.
The Japanese flooded their Market with ridiculous levels of Yen, back in the 80's.
Think Zimbabwea-style inflation.
Real Estate prices appreciated 10 to 100 TIMES their original pre-bubble value.
That money bubble inflated the Nikkei some 300% to 40K.
That 40K reflected their depreciated YEN, in 1990 terms. Thats it.
In no way was it an accurate reflection of their inflation-adjusted growth!!
It was just money printing run amok, expressed through Stock Value.
So when the Bubble Collapsed, and all that money dried up, and the Nikkei returned to fair value relative to their hugely deflated currency - around 8K.
It could happen here.
...................................................................................
One would ask.....how can it not happen in the US ?
What is interesting this time around is that the prices of houses and cars have to adjust downward in a big way....
Who is left around to pay the old prices ?
Good question!
The answer comes down to nominal value.
The Japanese flooded their Market with ridiculous levels of Yen, back in the 80's.
Think Zimbabwea-style inflation.
Real Estate prices appreciated 10 to 100 TIMES their original pre-bubble value.
That money bubble inflated the Nikkei some 300% to 40K.
That 40K reflected their depreciated YEN, in 1990 terms. Thats it.
In no way was it an accurate reflection of their inflation-adjusted growth!!
It was just money printing run amok, expressed through Stock Value.
So when the Bubble Collapsed, and all that money dried up, and the Nikkei returned to fair value relative to their hugely deflated currency - around 8K.
It could happen here.
...................................................................................
One would ask.....how can it not happen in the US ?
What is interesting this time around is that the prices of houses and cars have to adjust downward in a big way....
Who is left around to pay the old prices ?
Index-Level Fundamentals as of September 30, 2008
S&P Japan 500
Div Yield 2.2164
P/Sales 0.5593
P/B 1.2599
P/CF 6.3676
ROE 9.5433
P/E: Last Reported Annual EPS 13.2017
P/E: 1-year Forward Projected EPS 13.121
P/E: 2-year Forward Projected EPS 11.6186
http://www2.standardandpoors.com/po...es_jp500/2,3,2,7,0,0,0,0,0,0,2,0,0,0,0,0.html
S&P Japan 500
Div Yield 2.2164
P/Sales 0.5593
P/B 1.2599
P/CF 6.3676
ROE 9.5433
P/E: Last Reported Annual EPS 13.2017
P/E: 1-year Forward Projected EPS 13.121
P/E: 2-year Forward Projected EPS 11.6186
http://www2.standardandpoors.com/po...es_jp500/2,3,2,7,0,0,0,0,0,0,2,0,0,0,0,0.html
It mainly comes down to demographics. Think about what would happen if all boomers went into retirement.
Why do you think it's so important to make sure boomers don't change their spending habits? If they did, our economy woud collapse. This is the threat that is looming over the next 5-10 years.
This is and has been Japan's problem: an aging population with a low birth rate. Regardless of the money supply. You can print until the cows come home--if there aren't enough people to keep the economy growing (participants who circulate those dollars), you'll be facing deflation.
The credit crisis couldn't have come at a worse time, since now the Fed is completely unarmed against the next crisis:
A population bubble.
Why do you think it's so important to make sure boomers don't change their spending habits? If they did, our economy woud collapse. This is the threat that is looming over the next 5-10 years.
This is and has been Japan's problem: an aging population with a low birth rate. Regardless of the money supply. You can print until the cows come home--if there aren't enough people to keep the economy growing (participants who circulate those dollars), you'll be facing deflation.
The credit crisis couldn't have come at a worse time, since now the Fed is completely unarmed against the next crisis:
A population bubble.
One reason that hasn't been mentioned is because Japan is such a tiny country that is very densely populated. There isn't room for expansion so real estate remains very expensive and people tend to save.
Japanese real estate has been in a depression you fool.
the reason the n225 is taken so long to bottom is simple......the public has up to this point taken too long to give up and get out. In the 1930's it took the USA public 3 years to give up and get out, which is why depite what you hear as so bad about the 30's the whole thing was over with in 3 years time. The economy began to grow at 10% a year after that (albeat from a 50% smaller economy.
There was also a little something called a World War.
Here is a VERY good summary from Stephen King:
http://www.independent.co.uk/news/b...a-lot-to-learn-from-the-japanese-1645764.html
http://www.independent.co.uk/news/b...a-lot-to-learn-from-the-japanese-1645764.html