A Must-See Chart — We Are Not Japanese, huh?

This Bloomberg's chart of the day — via Ritholdz — is amazing. See for yourself:

This year’s tumble in U.S. stocks mirrors the Japanese selloff that began 11 years ago, an indication to hedge fund TTN AG that American equities may have further to fall. 
The CHART OF THE DAY shows the pattern of gains and losses in the MSCI USA Index has followed the dollar-denominated MSCI Japan Index with an 11-year lag since 1990. 
[...] “We may see a Japan 2.0 scenario”[...]
I've been saying for many years that you do not need a crystal ball to figure out what will happen during the next 15 years: you need a history book of the great depression titled America's Great Depression by Murray Rothbard and a history book of the Japanese bubble economy's collapse from the peak of 1989-1990.

The Japan Syndrome is our Future, our destiny. They lead the western civilization by 11 years, that's it.

Oh, I hear all the voices yet again saying that "the US is not Japan", "the US consumers are not savers like the Japanese ones, they are addicted to their credit cards", etc.

This argument is just so easy to debunk: well, do you really think that those Japanese consumers were really savers when they blew the biggest real estate bubble mankind had ever known back in the 1980s? Really? The secular shift from debt addiction to debt phobia has already taken place in Japan, a long time ago, so long that the short sighted market participants have long forgotten that. And the same will happen in the US and Europe.

One final point: according to this chart, we are on the verge of one massive leg down that should take the S&P 500 to below 600 points.


Tiho said...

US is nothing like Japan.

In Japan market went down in their own currency, creating deflation. Currently it is down 80% from its 1989 peak. In America, market is actually going to go higher, but the currency is going lower. So it will be a sideways movement.

In Japan bond holders were rewarded due to rising currency and risk positive interest rates. The commodity bear market was alive from 1980 to 1999.

In America bond holders will be rewarded with devalued currency - in other words - wipped out. There is no deflation in the US, the price of EVERYTHING apart from a house, in the US is higher than 10 years go. Everything is going higher and higher, because commodity bull market is now alive since 1999 and it will go to at least 2016 or so.

Therefore, US is nothing like Japan. However, if you compare two markets in same currency and use cheating log scale to line them up... then year sure... they look alike! I can make apples look same as oranges with some a point brush and some colour!

Tiho said...


risk positive= real positive

my point is Japan had real positive interest rates on the yield curve. Currently the whole US yield curve including the 30 Year Long Bond is yielding negative real interest rates. That is if you believe BLS phoney CPI numbers.

And as commodities go higher and higher, so will CPI, like in the 1970s, and the US yield curve will be negative by 5% soon haha. Savers are getting wiped out in cash and bonds. It will be a total suicide investment!

Tiho said...

p.s. Eventually you will understand it has nothing to do with US consumer, but the Kondratiev Cycle, which Prechter himself follows.

But he just made a mistake, he has put the Kondratiev Cycle to the side, only trusting his Elliot Wave Super Cycle Theory. EW does not work all the time...

However, Kondrtiev Wave states that when equities enter bear market, commodities are in the bull market. That has worked for 400 years throughout every generation and every age. Is this time going to be different?

No it won't. Commodities keep moving higher and higher, and therefore we are nothing like Japan! It has nothing to do with deflation busts or hyper inflation, neither of which I believe. We are just having a commodity bull market which is creating higher rates of CPI than normal (real CPI not BLS phony crap).

Don't worry, you'll get it one day. =)

pej said...

same old same old Tiho. It's basically the deflation vs inflation debate. I still think deflation is the trend, and that bonds might sell off from time to time, but won't stay low for a long time. And I believe the USD will rally massively in the course of the next 2-3 years, surprising everybody.