While putting together macroeconomic data for the business case, something did strike me. The debt of Japan is above 200% of GDP and nobody talks about that as an issue….
Though some are starting to, not least the Japanese themselves. In the past it was the Japanese citizens who had the good civic sense of saving money to then lend it to their Government to spend, so it remained “in the family”, but now that the domestic ownership of the Japanese Government’s debt is down to around 60%, there is a good reason to start worrying… Japan about their foreign creditors’ intentions and those creditors about Japan’s real reimbursement potential (or intention) over time.
Anyway, my point for today is elsewhere. The Japanese “crisis” started with the burst of the crazy stock-market bubble and related instruments used to trump it up at the end of 1989 (e.g. the japanese-warrants craze, for those who remember things beyond a few years back); note that in December 1989 the world was busy marvelling about the collapse of communism, point on which I recommend looking back at that chapter in my book (“The Tale of the Communists’ Trick to Kill Capitalism”).
Since 1989, what happened in the Land of the Rising-Sun? To make it short, you haven’t heard of Japan as a sexy place to invest in any way, their interest rates have been rock bottom ever since (sometimes even negative, though that made the debt sustainable), and the main stock-market index (NIKKEI 225) is today under 9’000 and was on the 31st of December 1989 at…. C’mon, take a guess! It was at….. Yeah, yeah almost 23 years ago, it was at…. Ok, I’ll tell you: just above 39’000. Yep, a performance of -77% over 23 years! Now to really enjoy, try to find some reports from “analysts” in the years 1988-1989 and assess their understanding of what they are talking about when comparing their views with what really happened. No offense to my analysts friends, but think about your future and update your CV…
So just try to imagine what could happen to the majority of stock-valuations throughout the world in the coming years? You want to invest? Try land and grow food on it…. You will never be wrong with that “bet”…
Simon Q