You think You've had it bad - look at the Nikkei

[dex]

1990 almost 39,000
Today almost 8,000
So on the S&P if 1,500 was the high; apx 300 is what it would look like if it followed the Nikkei

Have a good night's sleep.

http://finance.yahoo.com/echarts?s=^N225#chart1:symbol=^n225;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

 

[Geoffrey]

Yeah . . . and the Nikkei has been that way for about 20 years! Having lived in Japan I can vouch for the fact the few middle-class Japanese trust the stock market. Can't blame them really -- after 20 years they are still recovering from their real estate bubble. I hope the pundits that say our bubble is different than the Japanese bubble are correct. However, I believe Japan does illustrate that under the proper conditions these things can last a L-O-N-G time.

 

[ls99]

Good thing I had a good night sleep, before seeing those numbers. Very un-good. But I will have a good night's sleep again. The market will recover. And no, I'm not bailing out to lock in the losses.

 

[Dawg52]

I fully expect our market to perform the same way over the rest of my life. Nice.

 

[chinaco]

There have been a number of reasons for the Nikkei dropping and remaining low. Partly the banking system and bad debt.

The Nikkei high represents a large bubble that burst in the Japan heyday that never recovered.

It is a lack of confidence in the govt to enact reform and consequently the Japan ha suffered. They have difficulty raising capital through the local stock market.

That same lack of confidence could come to America if we do not fix the out market system and economy.

IMO - We can fix our situation if we rid ourselves of the aspects that have caused mistrust and restores confidence.


It is not American Business or even the govt that is the problem... it is the malfeasance in our financial system that will ruin us.

Right now the govt is in a trap the economy is disparately impaired.

The govt needs to do triage on American Business to ensure that we do not have entire domestic industries fail due to the financial meltdown.

The govt is also going to have to take a very tough stand on the financial services industry and our market system. Until they have laws that essentially have the power to reach back and send people to jail and take away all their personal profits... they will not have the offenders attention. This means reaching further down in the organizations and making them pay even if it was claimed to be an oversight (i.e., negligence).

The root problem right now is that people take too much risk because they know they will not be held accountable.

I think we might be able to handle the situation in a way that it could correct itself. If we remove excess compensation for the executive ranks. That is the key motivator to malfeasance. We were innovative in the past when exec compensation was more reasonable, we can be that way again. The ability to extract massive amounts of wealth in a short period is what drives people to do very risky and bad things.

Public Companies need to curb executive compensation. In private companies you can bet that a smaller number of owners do not let that get out of hand very often. The owners keep tabs and watch things very closely. In Public companies there is no owner to keep tabs... ownership is too diluted.


If you want to raise capital from the public... excess compensation should be done away with. There is a way to set some reasonable guidelines!

 

[soupcxan]

Don't think it can't happen here in the US to a big asset class. Consider the Nasdaq, reached 5000 eight years ago. Today it's below 1500. That's -70%, or eight years of a -14% compound annual return.

 

[yakers]

So you are a working stiff in Japan all through these years; where do you put your money? Stocks domestic/foreign, bonds, real estate, in the mattress?

You are an American these days, where do you put your money? My wife's IRA is in Wellesley and my main one is in a target retirement fund. No where to himde for me and it looks like the only good choices the Japanese had in that time was foreign stocks/bonds, real estarte took a drubbing if you bought at peak. Right now if I were Japanese I suppose I would be buying foreign stocks if I thought there were a bargain.

 

[al_bundy]

looking at the nikkei from a technical perspective, it's a screaming buy now

 

[ejman]

1990 almost 39,000
Today almost 8,000
So on the S&P if 1,500 was the high; apx 300 is what it would look like if it followed the Nikkei

Have a good night's sleep.

http://finance.yahoo.com/echarts?s=^N225#chart1:symbol=^n225;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Well yes, but what really happened? Japanese continued to have a high standard of living, their economy continued to function and proceeded to continue the clobering of our auto industry. All that happened is a bubble burst - not the end of the world. True a lot of bubble suckers got hurt still not the end of the world. Same thing with our bubble (s) (I hope )

 

[tmm99]

I posted a Nikkei index question on diehards(bogleheads) a while back (I am not sure if you have to a member to be able to view this thread)
Bogleheads :: View topic - Nikkei index and US - question

The article in question below.

Discuss - Valuations and the Nikkei Bubble

Valuations and the Nikkei Bubble oildog 08-29-2007, 3:20 AM | Post #205518 |
1
You know, it often seems to me this board has an unnecessary aversion towards discussing market valuations. I suspect this is because the people who most often talk about valuations are market-timers, and buy-and-hold indexers generally don't feel the need to talk about market valuations. However, IMO discussing valuations responsibly can be helpful.

A good example of this is Conversation #60199, in which a novice poster raised the possibility (post #50) that the US stock market might behave like the Japanese market since 1989 (see Nikkei chart). The responses to this post was basically along the lines of anything can happen in the markets and stay diversified. Although that isn't bad advice, it seems to me we can do better.

The Nikkei bear market occurred from a starting point where the P/E ratio on Japanese stocks was 78. In comparison, the P/E ratio on the S&P 500 today is about 17. Just from a naive and back-of-the envelope estimate, for the two to be comparable, the S&P 500 today would have to be at about 6,600 (or the Dow 60,000).

Another angle: Right now, the P/E ratio for the Nikkei 225 is about 21, and the index is down about 50% from the historical peak 18 years ago. Again, a really crude calculation - for the S&P 500 to end up in a similar situation, it would be priced at roughly 700 in 2025. For the index to have a P/E of 21 under those circumstances, earnings of S&P 500 corporations would have to contract by about 60% during the next 18 years. For comparisons sake, starting from the 1929 peak prior to the Great Depression, S&P 500 earnings were basically unchanged 18 years later.

To sum up, it would take something far worse than the Great Depression to make the S&P 500 behave like the Nikkei did starting in 1989. While it's true that anything can happen in the stock market, and a Super-Depression can't be ruled out, the probability that US stocks will go through a Japan-like event starting from these levels would appear to be exceedingly small.


Best,
Oildog

 

[smallguinea]

Well yes, but what really happened? Japanese continued to have a high standard of living, their economy continued to function and proceeded to continue the clobering of our auto industry. All that happened is a bubble burst - not the end of the world. True a lot of bubble suckers got hurt still not the end of the world. Same thing with our bubble (s) (I hope )

I know this is a really old thread, but I really need to rebut this poster and give him some actual perspective of Japan, and not the anime or Tokyo Drift version.

I'm Japanese. Japan doesn't have a high standard of living, at least relative to white middle class Americans. Most Japanese live in a tiny 800 sq ft concrete apartment with no insulation that look pretty much identical to communist housing in China or Eastern Europe. Many of us hang laundry in our balcony because we cannot afford the costs of owning a dryer. The typical Japanese food? 700 yen ($8) ramen noodles. Not sushi. Not the wide variety of ethnic food that Americans enjoy for similar prices.

Most Japanese cannot afford the Japanese cars driven by Americans (Camry, Accord, Lexus, Acura). Middle class Japanese families drive cars like the Yaris or a hatchback Civic. Traffic is absolutely horrible because we do not have an American-like interstate highway system.

The few name brand companies (Sony, Honda, Toyota, Canon, Matsushita) cannot sustain a nation of 130 million. Toyotas sold in the US are made by Americans, not Japanese. Most in Japan merely get by. There is very little optimism about Japan's economy. We work longer and longer hours for the same pay in anonymous office cubicles, while costs relentlessly go up. To give you a perspective on how expensive Japan is, a taxi in Japan is 780 yen ($9) per 2km. The consequence is many Japanese youths have given up and now live with their parents into their 40s suffering chronic depression.

No, the US doesn't want to repeat Japan's mistakes. Japan in most respects feels like it has been stuck in the 1980s while the rest of the world has passed by or caught up.

 

[dex]

Thanks for taking the time to write. That is a side of Japan we in the USA never hear about.

Many of us in the USA do not know what we have (or had).

 

[kyounge1956]

Thanks for taking the time to write. That is a side of Japan we in the USA never hear about.

Many of us in the USA do not know what we have (or had).

So true. I studied overseas my fourth year of college, and I think the thing I learned which has stuck with me the most is just how cushy we have it here in the States. I suspect that many people who've never been outside the US have no idea how many luxuries we have here and take completely for granted.

Maybe having it so good is not really good for us, but that's another question (and after my remarks earlier today about thread-jacking, that's all I'm going to say about that here. )

 

[ejman]

I know this is a really old thread, but I really need to rebut this poster and give him some actual perspective of Japan, and not the anime or Tokyo Drift version.

I'm Japanese. Japan doesn't have a high standard of living, at least relative to white middle class Americans. Most Japanese live in a tiny 800 sq ft concrete apartment with no insulation that look pretty much identical to communist housing in China or Eastern Europe. Many of us hang laundry in our balcony because we cannot afford the costs of owning a dryer. The typical Japanese food? 700 yen ($8) ramen noodles. Not sushi. Not the wide variety of ethnic food that Americans enjoy for similar prices.

Most Japanese cannot afford the Japanese cars driven by Americans (Camry, Accord, Lexus, Acura). Middle class Japanese families drive cars like the Yaris or a hatchback Civic. Traffic is absolutely horrible because we do not have an American-like interstate highway system.

The few name brand companies (Sony, Honda, Toyota, Canon, Matsushita) cannot sustain a nation of 130 million. Toyotas sold in the US are made by Americans, not Japanese. Most in Japan merely get by. There is very little optimism about Japan's economy. We work longer and longer hours for the same pay in anonymous office cubicles, while costs relentlessly go up. To give you a perspective on how expensive Japan is, a taxi in Japan is 780 yen ($9) per 2km. The consequence is many Japanese youths have given up and now live with their parents into their 40s suffering chronic depression.

No, the US doesn't want to repeat Japan's mistakes. Japan in most respects feels like it has been stuck in the 1980s while the rest of the world has passed by or caught up.

Thank you for a very interesting perspective. However, in the context of the OP statement, did the standard of living in Japan go down when the Market went from its top in 1990 to today? Did people generally live in 1,500 sq ft apartments in 1990 and now can only afford 800 ft ones? Did the middle class back in 1990 drive the equivalent of Lexus and are now driving Yaris?

 

[Alan]

I know this is a really old thread, but I really need to rebut this poster and give him some actual perspective of Japan, and not the anime or Tokyo Drift version.

I'm Japanese. Japan doesn't have a high standard of living, at least relative to white middle class Americans. Most Japanese live in a tiny 800 sq ft concrete apartment with no insulation that look pretty much identical to communist housing in China or Eastern Europe. Many of us hang laundry in our balcony because we cannot afford the costs of owning a dryer. The typical Japanese food? 700 yen ($8) ramen noodles. Not sushi. Not the wide variety of ethnic food that Americans enjoy for similar prices.

Most Japanese cannot afford the Japanese cars driven by Americans (Camry, Accord, Lexus, Acura). Middle class Japanese families drive cars like the Yaris or a hatchback Civic. Traffic is absolutely horrible because we do not have an American-like interstate highway system.

The few name brand companies (Sony, Honda, Toyota, Canon, Matsushita) cannot sustain a nation of 130 million. Toyotas sold in the US are made by Americans, not Japanese. Most in Japan merely get by. There is very little optimism about Japan's economy. We work longer and longer hours for the same pay in anonymous office cubicles, while costs relentlessly go up. To give you a perspective on how expensive Japan is, a taxi in Japan is 780 yen ($9) per 2km. The consequence is many Japanese youths have given up and now live with their parents into their 40s suffering chronic depression.

No, the US doesn't want to repeat Japan's mistakes. Japan in most respects feels like it has been stuck in the 1980s while the rest of the world has passed by or caught up.

Welcome to the site, it's always good to get new members from far afield.

I remember reading that the average person in Japan was not invested in the stock market so their savings were not as badly affected when the Japanese stock market crash happened as the average person in the USA during the crash of 2008. Is it still the case that most folks in Japan are cautious about the stock markets and prefer to hold their savings in solid investments such as CD's, money markets and the like?

 

[smallguinea]

Thank you for a very interesting perspective. However, in the context of the OP statement, did the standard of living in Japan go down when the Market went from its top in 1990 to today? Did people generally live in 1,500 sq ft apartments in 1990 and now can only afford 800 ft ones? Did the middle class back in 1990 drive the equivalent of Lexus and are now driving Yaris?

Consumption was wiped out. Everyone had monstrous mortgages. The problem with Japan was that most homeowners remained responsible and paid their mortgages (at the cost of all other consumption). Thus home prices declined only gradually and prolonged the "austerity." Unfortunately the vast majority of residential buildings in Japan were hastily built (cheap cement) with the understanding that in less than 20 years they would be replaced with better, bigger dwellings. But with little economic growth for two decades and many still underwater, there was nothing but stagnation.

So to specifically answer your question, people had owned small homes even back in the booming 1980s and drove 1980s Civics (if middle class or above). The difference was that Japan in 1980s was still coming from being a poor Asian country (WWII was just one generation away). There was a lot of euphoria in the 1980s, but the euphoria mainly was in the understanding that thing would get even better. Things never did. That's the punch to the gut. Incomes never caught up, and worse, job security and pensions have been slowly eroding.

So standard of living didn't strictly drop, but we lost two decades of revitalization and renewal. 20 years is a high opportunity cost. The only thing we have to show for it is rotting cement apartment blocks that are still too expensive to tear down (and there's too little money to build anew).

So count yourselves lucky that many Americans are irresponsible and walked away from their overinflated homes. It allowed the market to correct itself quickly.

Real estate bubbles are the worst possible evil. Worse than terrorist attacks. China is next, if its housing bubble continues, it will suffer a similar fate as Japan: premature halt of all further economic growth.

 

[aaronc879]

I'm Japanese. Japan doesn't have a high standard of living, at least relative to white middle class Americans. Most Japanese live in a tiny 800 sq ft concrete apartment with no insulation. Many of us hang laundry in our balcony because we cannot afford the costs of owning a dryer.

I'm a white middle-class american and I live in a 800 sq ft concrete apartment/condo with no insulation. I can't hang laundry on my balcony because 300 days a year it's either too cold or raining.

 

[smallguinea]

Welcome to the site, it's always good to get new members from far afield.

I remember reading that the average person in Japan was not invested in the stock market so their savings were not as badly affected when the Japanese stock market crash happened as the average person in the USA during the crash of 2008. Is it still the case that most folks in Japan are cautious about the stock markets and prefer to hold their savings in solid investments such as CD's, money markets and the like?

The Japanese don't trust the stock market at all... especially after the 1990 crash. Yes, most hold their money in savings accounts and CDs. There were average people who got involved in the market just before the 1990 crash. Mostly speculating though. But not on a wide scale (like IRAs) since retirement was primarily funded by company pensions (cradle-to-grave). The biggest investors were the zaibatsu corporations.

 

[smallguinea]

I'm a white middle-class american and I live in a 800 sq ft concrete apartment/condo with no insulation. I can't hang laundry on my balcony because 300 days a year it's either too cold or raining.

It's different if you're single. That's not a lot of space for a family of 3 or 4. Japan has a year round humidity of 70%+ in most parts. People still hang laundry outside, even during the 100% humidity monsoon season.

 

[Leonidas]

Real estate bubbles are the worst possible evil. Worse than terrorist attacks. China is next, if its housing bubble continues, it will suffer a similar fate as Japan: premature halt of all further economic growth.

From today's Financial Times:

The city of Beijing has issued rules limiting families to one new apartment purchase as authorities try to rein in rampant property speculation and soaring prices...

...The capital's government also ordered banks to refuse home loans to people who cannot prove they have paid taxes and made social security contributions in Beijing for at least one year...

Banks also have been told to block mortgage applications for people buying their third property...

The rules marked the latest in a series of measures by Chinese authorities as they seek to reduce the risk of the red-hot property market overheating and derailing the booming economy.

Prices in major cities rose 11.7 percent year-on-year last month, the fastest pace since a nationwide survey was widened to 70 cities in July 2005, official data show.

complete story here Beijing city limits home-buyers to one new apartment: Media-International Business-News-The Economic Times

 

[Rambler]

There is more to the story smallguinea. Consider the form of gov't in Japan. Consider Mr Ozawa and the crazy scandals in which he involves himself. Consider Mr Hatoyama, who along with Mr Ozawa think that they can take Japan back to the good ol' days of the 1980s. I don't mean to get political here, but what I am trying to say is that Japan and its people have made their choices and sometimes those choices are visited upon the heads of several or many generations to come. I am afraid the America may find itself in the same boat in the coming years, having to pay off the debt of rampant consumerism, much like Japan is still paying off the debt of its own bubble of the 80s.

One of the problems of Japan though is that the people have voted for "change" rather than "substance". Of course, there has been no substance available for which to vote. Again without trying to be too political, is this or will this be the case in the US as well? Time will tell.

Smallguinea, believe me, I am not trying to be critical of your culture. You see, I live in Japan, and I have for many years. I know the differences of which you speak. I have also visited many countries around the world. There have been several occasions in which I have gone home for a visit, and I have looked around in the supermarket at the piles and piles of food, and I have actually had tears come to my eyes, thinking that my fellow Americans have NO idea how good they have it.

BTW, I do know what it is like to live in a 2K...each room a 4.5 mat room, with 2 kids. I did it for 8 years. We slept in a "yon-hon-gawa". Again, you will know what that means.

Finally, I have a hard time considering retiring here, because in the city, there is literally nothing for a retired man to do, and the typical Japanese DW doesn't want her husband home all day.

R

 

[Alan]

The Japanese don't trust the stock market at all... especially after the 1990 crash. Yes, most hold their money in savings accounts and CDs. There were average people who got involved in the market just before the 1990 crash. Mostly speculating though. But not on a wide scale (like IRAs) since retirement was primarily funded by company pensions (cradle-to-grave). The biggest investors were the zaibatsu corporations.

Thanks for that background. I'd be interested in hearing a little more about yourself, if you don't mind sharing. (I'm from the UK and you can read more about me in my profile)


Have you lived in the USA for long and how long do you expect to stay here?

Do you invest in the stock market?

Any plans for retirement?

 

[Texas Proud]

The Japanese bubble was a LOT bigger than the US...

I remember reading that at some point, all the land in Japan was worth MORE than all the land in the US... crazy..

Also, I read that the Aussies had a big compound with their consolute... and sold part of it (like and acre or two) and balanced their budget that year!!!


Another problem is that the banks did not have to recognize their losses.. there was an article about this one man who owned a small machine shop.. he had borrowed a lot of money... (can not remember the amount, but let's say it was around $1 mill US dollars)... he said that every once in awhile he had to go to the center of town to the bank and sign papers that 'extended' his loan... he paid nothing, and could never pay anything... but the bank kept the loan on the books for many years... and who knows, he still might be trecking to the bank and extending it...

SOOO, the banks were 'dead', because they did not have funds to lend... but nobody wanted to borrow money anyhow.... and with an effective rate of zero... well....

 

[IndependentlyPoor]

SOOO, the banks were 'dead', because they did not have funds to lend... but nobody wanted to borrow money anyhow.... and with an effective rate of zero... well....

Yep. Paul Krugman and other Keynsians call this a liquidity trap. P.K. worries that we might be headed the same way.

 

[ESRwannabe]

This is why I invest globally. I've already got too many eggs in the US basket as is.