Gersh, I do not think that the Japanese investor needs to actually invest in the US stock market to create excess liquidity here, it is quite sufficient that they invest in the bond market. Such an action has a double effect, first they put pressure on our interest rates (to decline), second, as our rates go down, US monies that would have gone to treasuries is diverted to stock.
In the liquidity game what counts is the total amount of money chasing the different assets classes, and until the market see "writtings on the wall" that a decline in corporate profitability is imminent (and with some durability), stock will take their "fair" share of this excess liquidity.
As for the "survivors" fear of our bubble, since they have been through their own. I believe that at their peak they had a PE of 80 or so, and even now the PE of the Nikkei is higher than that of the US, and this with a relatively more leveraged infrastrucutre there and much lower cost of capital. So these guys have learned how to live with bloated PE's.
Zeev |
