Peak Japan seems just like yesterday.

We remember the days, or daze, working as grad student interns in the U.S. G when all govie economists were studying Theory Z, a Japanese management style and all the rage in business schools during the 1980′s.   That peaked on December 29, 1989, however, when the Nikkei hit its all-time of 38,957 and is now 77 percent lower almost twenty three years later.

Why do we have this gut feeling Japan and France will be the countries of focus next year? We believe the U.S. road to Greece travels first through France, the U.K., and Japan.  Yikes!

The following chart also fits perfectly into the presentation Hugh Hendry gave at this year’s Economist  Buttonwood Gathering.    Here’s Hendry,

I go to Japan…It’s hard to believe equities and properties have fallen 80 percent over the past twenty years…The impossible is happening today in Japan. Some of the largest Japanese corporates are on the verge of bankruptcy…

Click here for that interview.


(click here if chart is not observable)

Category: Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

5 Responses to “How the mighty have fallen”

  1. preserve says:

    There is still much to be learned from Japan. Probably more today, than the 80′s.

  2. BenE says:

    I like that quote which is often ignored: “not being able to earn a safe return on savings is causing people to hoard savings rather than consume”

    Low interest rates means lower prices on mortgages but higher prices on retirement savings. Since retirement savings are about 5x the price of a house, low interest rates are more of a cost than a benefit. As a 30yo just starting to save, the prospect of long term sub 1% real returns means my nest egg will be very expensive and I will have less money for everything else.

    I’m half of a two income couple, better off than most but a lot of my friends are unemployed, underemployed or stuck in the education system doing PhDs for no money in their 30s.

    A lot of people in my generation will have no choice but to work till 75.

  3. BenE says:

    Now that I have watched the video I must add that I don’t agree with Einhorn that the low rates from the feds are the problem. That’s upside down thinking. Higher rates must come from a stimulated real economy not from monetary manipulations. If low fed fund rates are what’s needed to jumpstart employment and the stock market that’s ok. Competent management of the economy leading to higher GDP, higher stocks, more private sector demand for loans should lead but tighter monetary policy should soon follow.

  4. Futuredome says:

    Ben, I will take it a step farther and say rates to low has been the FED’s problem since the end of the Clinton era boom.

    What we want to see is a steepening yield curve as flight to saftey ends with a economy growing at “catchup” speed. This would no doubt lead to a sharp drop in government deficits and a fleeing from treasuries as flight to saftey ends boosting pensions.

    In terms of short term rates, we can’t get them low enough in real terms, to do the job. I would argue they were to high overall the last expansion as well, while the mortgage biz, they were to low. That is the problem with artificially raising interest rates across the board. What should have happened was “Q.tighening” by the FED in mortgage markets to force the short term rates higher while the overall market declined to bring in capital. This would have flew capital from RE like mad and probably cost Bush the election. This is a piece of Greenspans “admission” that is world was rocked. No way, did he expect the invester class to make such a pig headed choice which would require intervention. No, he thought they would invest in the next big thing.

  5. Greg0658 says:

    Ben I think you see what I see as a/the problem .. cash money compete’g with corporate stocks for favor

    cash money can’t compete with free money* given to manufacturers for the stuff we need to survive

    * free money ? it has payback with an uptick in price .. rriigghhtt
    (ok – to an extent)

    next step > hedonism and wring out the small with that plan .. goodbye excess population**
    (see capitalism does work) – of course it does

    **especially when “its me or you” takes hold -ie: not “Save the __” as a business plan