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01-10-2002 12:26 AM

nikkei average

wild bill has stated that stocks must go up because they are a function of the growth. or some such thing. i dont quote him but just add this to make a point.

stocks do go up over time but do not surely go up. such is the case in japan.back around 1989 the nikkei average was almost 39,000 and now its fighting to stay above aout 10,000 or so. what happened . i dont know. but around then i wanted to short the japenese market. but i was talked out of it, as it just always went up even though valuations were way too high. like 70 p/e ratio. as most know, thats what i say p/e determines a stocks value and almost nothing else. so i didnt short those stocks as i chickened out and felt that the wait could be a long time as people in japan were willing to pay those prices forever it seemed. but it crashed and still hasnt shown any chance of return to those lofty levels of 1989.

what really haqppend is that one fine day everyone just decides that a 70 p/e ratio is too much to pay for those stocks. then it gets adjusted down to what they will pay. thats what happens when we have a crash. for the last ten or more years people new to the game believed that 30 to infinity was ok to pay for these new growth stocks. cant be right as earnings too far into the future cant be forcast and always are way too optimistic. so we had a big adjustment in the market. but really just a small one as the ratios are still very high for stocks traditionally. i still remember all the young experts on tv saying its a new world and thats how to evaluate the stocks in our new economy. bullshit.

01-10-2002 12:59 AM

Stocks do always go up (Re: nikkei average)

Somewhere around the year 2050, the Nikkei will be above 40,000.

01-10-2002 01:34 AM

Re: Stocks do always go up (Re: nikkei average)

yea, and many people dont realize that while waiting for something to recover the cost of money is eating them up as well.

as far as 2050 i still doubt it. what japan had going for it in the 60's 70's 80's is long gone and i believe(with no facts to back it up) that in the future they will be a minor factor and hurting economy in the world as they have nothing for natural rescources or better talent than the upcoming countries as they did back a few years ago.

01-10-2002 02:07 AM

Re: Stocks do always go up (Re: nikkei average)

Ray are you falling into the same trap as Elroy? The question is if its EV, not when they go up. Besides the Japanese economy has hardly grown since 1989, its sickly GDP growth greatly retards the stock prices going up. However Japan, even with its large size, is just an anomaly. All other major world markets have gone up greatly since then and the Nikkei's share of the world's investment money is quite small, especially when you consider almost as much Japanese money is invested in the US markets as it is invested in the Japanese market.

I agree that bubble prices can and will cause occasional problems with the prices going up, however I think its fairly likely that the Nikkei will be above its 1989 price sometime before 2015, if not much sooner. And I think you GREATLY underestimate the Japanese and their economy. How many other countries in the world could endure 10 years of almost no growth, terrible natural disasters, a political and banking mess that few countries could match in recent times...yet still easily maintain its standing as the world's second biggest economy? Further in a globalized world, I like the Japanese structure. They will have problems with their aging populations strain on finances, but how can you argue against a country with a very wealthy population, a homogenous society, and one of the world's strongest devotions to education??? Natural resources have nothing to do with being a successful nation in the 21st century. The US has to import almost every major natural resource it needs and you don't seem to think this country will have problems. After all if natural resources were so important, why haven't Australia and Canada taken a stronger role in the world's economy? They are mere second rate players that are forced to follow in the footsteps of the US and the UK with their currency getting battered badly for long stretches of time. For all its troubles, Japan's currency has held much of its value since 1990 because the world will still clamor for Japanese products and still wants desperately to sell its goods to them because there are few places with such willing and able buyers. Maybe I am making the mistake being the pseudo-econ guy. I admit I am not a market scientist, but I still think looking at the world with an economics perspective first is the best way to see the big picture, while I will leave the tidbits of science or past stock price movement history to the others...

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