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For people who think that this is just automatically a buy because "prices have to go back up again, right?", it's worth looking at the Nikkei[1]. Note the pea

For people who think that this is just automatically a buy because "prices have to go back up again, right?", it's worth looking at the Nikkei[1]. Note the peak in 1989 has still not been regained, and the market is about half that level now. Now is the US economy fundamentally less messed-up than Japan? Absolutely (in general). But every fall is not necessarily a buying opportunity even if you have a very long-term horizon. [1] https://finance.yahoo.com/quote/%5EN225?p=^N225&.tsrc=fin-srch https://finance.yahoo.com/quote/%5EN225?p=^N225&.tsrc=fin-sr...

xwdv 7y ago
Stop bringing this up, it’s been debunked that this isn’t an accurate example.
- freehunter 7y ago
  One reason why it’s not a great example is the exchange rate of the currency. The Yen is worth about double now what it was in 1989.
  - 2bitencryption 7y ago
    is there a way to see the graph in more-familiar USD? I'd expect it to not appear as drastic?
  - seanhunter 7y ago
    Total return on the nikkei in dollars since 1974 is 3.6% annualised. So that's including exchange rate and dividends. That gets you to about double today in nominal terms what it was back then (yay compounding!) but is still a pretty terrible rate of return for having your capital tied up over a very long period of time.
rv-de 7y ago
Exactly - if I had lots of money lying around I'd probably invest some of it now. But it's not worth the risk if one doesn't have sufficient cash for bridging at least an entire year. If it's just a dip - then I'll have to live with not making that money - whatever. But if it is the beginning of a recession then investing earlier than one year from now is financially inefficient. For now I'll stick to me regular investment strategy/cycle aiming at long term gains.
themodelplumber 7y ago
Or use investing frameworks that help you preserve capital and also size up the market, like CAN SLIM or any of the hundreds or thousands of others. You don't have to be a daredevil to be participating in the market right now, but study and practice are probably an essential, along with an allowance for the proverbial bop on the nose.
whb07 7y ago
They also have had massive deflation stemming from lack of making babies. They've even have had to gasp allow more foreigners to come in and do some jobs.
- metalliqaz 7y ago
  The US stopped making enough babies too, but growth continued due to immigration. That is changing. Now I don't think the US market is headed towards something that looks like Japan's, but its something to think about.
  - ouid 7y ago
    somehow, I'm skeptical that the US's main mid term problem is going to be too many old people.
SkyPuncher 7y ago
Sorry, but this is a terrible argument. If we see that type of shift, we're going to be living in a very, very different world where American's general way of living will need drastic change. I hedge my bets, but somethings go well beyond y control.
- graeme 7y ago
  Why? Japan didn’t massively shift their way of life. They just had a market bubble.
pheug 7y ago
Nikkei is a price index. Total return with dividends reinvested probably surpassed the 1989 peak a while ago, but it's hard to find that data on it.
- seanhunter 7y ago
  I can't find a simple historical total return index on a free source but here's a calculator[1]. It says to me that 100% dividend reinvestment in the nikkei since 1974 would give you a total return annualised at 3.2% in yen and about 3.6% in dollars. Most people would have significantly better hurdle rates than that. So investing in the nikkei if you're a yen or dollar investor has been pretty average over the long term no matter how you slice it. [1] https://dqydj.com/nikkei-return-calculator-dividend-reinvestment/ https://dqydj.com/nikkei-return-calculator-dividend-reinvest...
JMTQp8lwXL 7y ago
One thing Japan has going for it is low housing prices. If we end up in a period of long stagnation, the opportunity for lower cost of living could be a good thing for some of the hotter markets like San Francisco and Los Angeles.

xwdv 7y ago

Stop bringing this up, it’s been debunked that this isn’t an accurate example.

freehunter 7y ago
One reason why it’s not a great example is the exchange rate of the currency. The Yen is worth about double now what it was in 1989.
- 2bitencryption 7y ago
  is there a way to see the graph in more-familiar USD? I'd expect it to not appear as drastic?
- seanhunter 7y ago
  Total return on the nikkei in dollars since 1974 is 3.6% annualised. So that's including exchange rate and dividends. That gets you to about double today in nominal terms what it was back then (yay compounding!) but is still a pretty terrible rate of return for having your capital tied up over a very long period of time.

rv-de 7y ago

Exactly - if I had lots of money lying around I'd probably invest some of it now. But it's not worth the risk if one doesn't have sufficient cash for bridging at least an entire year. If it's just a dip - then I'll have to live with not making that money - whatever. But if it is the beginning of a recession then investing earlier than one year from now is financially inefficient. For now I'll stick to me regular investment strategy/cycle aiming at long term gains.

themodelplumber 7y ago

Or use investing frameworks that help you preserve capital and also size up the market, like CAN SLIM or any of the hundreds or thousands of others. You don't have to be a daredevil to be participating in the market right now, but study and practice are probably an essential, along with an allowance for the proverbial bop on the nose.

whb07 7y ago

They also have had massive deflation stemming from lack of making babies. They've even have had to gasp allow more foreigners to come in and do some jobs.

metalliqaz 7y ago
The US stopped making enough babies too, but growth continued due to immigration. That is changing. Now I don't think the US market is headed towards something that looks like Japan's, but its something to think about.
- ouid 7y ago
  somehow, I'm skeptical that the US's main mid term problem is going to be too many old people.

SkyPuncher 7y ago

Sorry, but this is a terrible argument. If we see that type of shift, we're going to be living in a very, very different world where American's general way of living will need drastic change. I hedge my bets, but somethings go well beyond y control.

graeme 7y ago
Why? Japan didn’t massively shift their way of life. They just had a market bubble.

pheug 7y ago

Nikkei is a price index. Total return with dividends reinvested probably surpassed the 1989 peak a while ago, but it's hard to find that data on it.

seanhunter 7y ago
I can't find a simple historical total return index on a free source but here's a calculator[1]. It says to me that 100% dividend reinvestment in the nikkei since 1974 would give you a total return annualised at 3.2% in yen and about 3.6% in dollars. Most people would have significantly better hurdle rates than that. So investing in the nikkei if you're a yen or dollar investor has been pretty average over the long term no matter how you slice it. [1] https://dqydj.com/nikkei-return-calculator-dividend-reinvestment/ https://dqydj.com/nikkei-return-calculator-dividend-reinvest...

JMTQp8lwXL 7y ago

One thing Japan has going for it is low housing prices. If we end up in a period of long stagnation, the opportunity for lower cost of living could be a good thing for some of the hotter markets like San Francisco and Los Angeles.