Issue: 452
Sent: 30-08-2011 10:30:12
In this issue:

US Recovery: More on Lessons from JapanA How To Book Of Self Managed Super FundsPensions and Unitized FundsEmail Marketing For Planners
Return to full article list
HomeFree weekly newsletterSelf Managed Super Fund ArticlesContact usLogin

US Recovery: More on Lessons from Japan

Click here to buy - A How To Book of SMSF's by Tony Negline
John Robertson

Investors face critical judgments about how quickly more normal economic conditions will resume in the USA. Japan's experience should not be ignored.

I wrote this introductory paragraph for Edition 54 of the monthly ATC Digest in October 2008 in an article which questioned whether the US economy was sufficiently different from the Japanese economy to be able to avert a similar fate to that suffered by Japan after its own asset price bubble burst 20 years ago.

In looking back at that article, I decided to take the easy way out this week and to simply quote some of its key paragraphs.

There is now one further piece of accumulating information that reinforces the similarities between the current US predicament and what happened to Japan. The blue line in the chart at shows the Nikkei 225 stock price index, adjusted for movements in the US dollar exchange rate, since 1984. The red line is the S&P500 stock price index since 2007. It has been repositioned so that the high point in the US market coincides with the peak in the Japanese markets.

On Friday, Ben Bernanke addressed his central banking colleagues at their annual Jackson Hole retreat painting an upbeat picture of the US economy. According to the Fed chief, the economic events of the past four year will not adversely affect the economic outcomes in the longer term.

Bernanke might be right. On the other hand, he might have simply been trying to do all he could to support an ailing economy having run out of policy instruments to prevent a repeat of the Japanese malaise.

Even casual observation suggests that the emerging US market pattern is becoming scarily similar to that which followed the Japanese asset price decline.

The evidence is not conclusive. There are still some critical differences between Japan and the USA that position the USA more favourably. Nonetheless, the Japanese trajectory is clear: a 20 year decline in market values punctuated by periodic but ultimately unsustainable rallies that confounded investor expectations of a return to more normal market returns.

Financial advisers are still confronted by the same judgement referred to in the 2008 ATC Digest article.

Share this article
Click to share this article on Facebook Click to share this article on Twitter

Previous article         Next article

If you liked this article and would like more by email, subscribe! It's free.

[Bold fields are required]

Your details

Your alternate email address is used only if messages to your primary email address are returned to us.


Do you work in the financial services industry?

This email is general in nature only and does not constitute or convey specific or professional advice. Legislation changes may occur quickly. Formal advice should be sought before acting in any of the areas discussed. Be aware that the information in these articles may become innaccurate with time. Responsibility is disclaimed for any inaccuracies, errors or omissions. Particular investments are neither invited nor recommended and hence this publication is not "financial product advice" as defined in Section 766B of the above legislation. All expressions of opinion by contributors are published on the basis that they are not to be regarded as expressing the official opinion of any other person or entity unless expressly stated. No responsibility for the accuracy of the opinions or information contained in the contributor's articles is accepted by any other person or entity. Copyright: This publication is copyright. If you wish to reproduce this article you require a license, which can be purchased here, to do so.

Site design by Raycon