if Nikkei takes out 40K, it will actually be much more impressive in USD terms since Nikkei is quoted in JPY, and JPY probably will go up some more.
Nikkei today is actually worth a lot more in USD than it was in the early 80s at the same nominal price. back then JPY was very cheap.
so, one of the problems for Nikkei, in fact, is strong JPY. it means Nikkei is not as cheap as it looks. it also means Japanese companies can't make any money. like i mentioned before, that book "The Weight of the Yen" argues that JPY will continue to strengthen, and this will result in a nominal deflation in asset values, until assets are cheap enough that businesses can make money even w/strong JPY.
in fact that may be what is going on right now. maybe JPY just keeps getting stronger and Nikkei weaker (and wages weaker), to the point where cos can profit. are we there yet? i don't know.
(btw, i sometimes wonder if a positive feedback loop could be developing, where strong JPY reduces exports, thereby reducing income and increasing the need to repatriate foreign assets; as these foreign assets, mainly in USD, are sold to buy JPY, even more upward pressure is applied to JPY, thereby further lowering exports and increasing the demand for forex repatriation.)
re: US "saving", my theory is people can't "afford" to be savers the way Japanese have been. in Japan, saving means literally saving up yen one by one, either in a bank or a home safe. you have to save a lot given interest rates are zero.
US people can't save in this way because it would take them too long, first to pay back their debt and next to "save" for retirement. it would take the average person centuries to pay off their debt and save for retirement if they save 10% of income and get zero investment return.
if you have 50K income and require 30K for retirement and plan on a 30yr retirement, that is 900K you need saved up. saving 10% a year is just 5K, so there's 180 yrs of savings required just to retire. not to mention, if you live in Clownifornia and bought an average house costing 10x your income, that is another 100yrs.
of course, the way around all this is to pretend you will get large investment returns. a sufficiently large return assumption will allow you to retire on schedule. let's all hold hands and buy a Prius to celebrate.
so, J6P is in bad shape. fortunately he has a pension! oh wait--pensions are engaged in this same deluded practice, but on a much grander scale. they will all need bailing out, but not before they lose a few trillion more trying to make up for lost ground with their huge equity, HF, and other losing positions. |
