4 ms·

On the other hand, if you bought into the Nikkei in the late 80s/early 90s, you'd still be in negative returns 30 years later.

icelancer 6y ago
Yeah, people seem to ignore this part of the argument and just focus on US equities. There was a time not long ago - but long enough that most 20/30-somethings on this site don't study - that Japan was the obvious future steward of the technology age which even led to spikes in Asian-American hate crimes and lax policies of those events (Vincent Chin comes to mind), culminating in the clearly-better Japanese auto industry and their breakthrough JIT manufacturing methods. A few years later, their economy crashed (along with ours), but ours recovered through various means, mainly immense untapped natural resources, net inflow of immigrants (skilled and otherwise), the Internet, and well, Andy Grove, if we want to give credit to at least one individual here. Japan is now a funny country across the ocean we marvel for their cultural weirdness and spotless streets. It wasn't like that just 40 years ago, and the idea that the United States can't go down that road for some reason is... well, naively optimistic.
throw0101a 6y ago
First, talk to me when the CAPE of any market has a CAPE of 100 like the Nikkei had: > What if an investor decided to detach from the herd once the CAPE ratio hit 50? At that point, the Nikkei had already delivered 263% over the previous ten years, or 13.8% a year. Not too bad. But once the CAPE ratio broke 50 in 1986, it wouldn’t peak for another 45 months, and it would add another 145%. Could the person who sold at CAPE 50 really sit on their hands for another 4 years as the mania sucked everyone else in? * https://theirrelevantinvestor.com/2017/08/10/stock-bubble/ https://theirrelevantinvestor.com/2017/08/10/stock-bubble/ Second, the CAPE is fairly good at predicting future returns. Current S&P 500 CAPE: * https://www.multpl.com/shiller-pe https://www.multpl.com/shiller-pe So at 35.83, as I type this, the expected returns are 2.79%. If you can find an investment that earns at least that (or more), then you should be putting your money there. Can you list an investment that has that expected return? Indian, Bahrainian, or Mexican bonds perhaps? * https://www.investing.com/rates-bonds/bahrain-government-bonds https://www.investing.com/rates-bonds/bahrain-government-bon... * https://www.investing.com/rates-bonds/india-government-bonds https://www.investing.com/rates-bonds/india-government-bonds * https://www.investing.com/rates-bonds/mexico-government-bonds https://www.investing.com/rates-bonds/mexico-government-bond... The actual lessons to learn from Japan, one of which is diversification: > Diversification, as always, is the key to avoiding a blow-up. The entire point of diversification is to avoid having your entire portfolio in a Japan situation. The global stock market has done just fine since 1990 even when you include Japan in the results. * https://ritholtz.com/2017/10/japan-greatest-bubble-time/ https://ritholtz.com/2017/10/japan-greatest-bubble-time/ There are plenty of "markets" out there: * https://www.bogleheads.org/wiki/Callan_periodic_table_of_investment_returns https://www.bogleheads.org/wiki/Callan_periodic_table_of_inv...

icelancer 6y ago

Yeah, people seem to ignore this part of the argument and just focus on US equities. There was a time not long ago - but long enough that most 20/30-somethings on this site don't study - that Japan was the obvious future steward of the technology age which even led to spikes in Asian-American hate crimes and lax policies of those events (Vincent Chin comes to mind), culminating in the clearly-better Japanese auto industry and their breakthrough JIT manufacturing methods. A few years later, their economy crashed (along with ours), but ours recovered through various means, mainly immense untapped natural resources, net inflow of immigrants (skilled and otherwise), the Internet, and well, Andy Grove, if we want to give credit to at least one individual here. Japan is now a funny country across the ocean we marvel for their cultural weirdness and spotless streets. It wasn't like that just 40 years ago, and the idea that the United States can't go down that road for some reason is... well, naively optimistic.

throw0101a 6y ago

First, talk to me when the CAPE of any market has a CAPE of 100 like the Nikkei had: > What if an investor decided to detach from the herd once the CAPE ratio hit 50? At that point, the Nikkei had already delivered 263% over the previous ten years, or 13.8% a year. Not too bad. But once the CAPE ratio broke 50 in 1986, it wouldn’t peak for another 45 months, and it would add another 145%. Could the person who sold at CAPE 50 really sit on their hands for another 4 years as the mania sucked everyone else in? * https://theirrelevantinvestor.com/2017/08/10/stock-bubble/ https://theirrelevantinvestor.com/2017/08/10/stock-bubble/ Second, the CAPE is fairly good at predicting future returns. Current S&P 500 CAPE: * https://www.multpl.com/shiller-pe https://www.multpl.com/shiller-pe So at 35.83, as I type this, the expected returns are 2.79%. If you can find an investment that earns at least that (or more), then you should be putting your money there. Can you list an investment that has that expected return? Indian, Bahrainian, or Mexican bonds perhaps? * https://www.investing.com/rates-bonds/bahrain-government-bonds https://www.investing.com/rates-bonds/bahrain-government-bon... * https://www.investing.com/rates-bonds/india-government-bonds https://www.investing.com/rates-bonds/india-government-bonds * https://www.investing.com/rates-bonds/mexico-government-bonds https://www.investing.com/rates-bonds/mexico-government-bond... The actual lessons to learn from Japan, one of which is diversification: > Diversification, as always, is the key to avoiding a blow-up. The entire point of diversification is to avoid having your entire portfolio in a Japan situation. The global stock market has done just fine since 1990 even when you include Japan in the results. * https://ritholtz.com/2017/10/japan-greatest-bubble-time/ https://ritholtz.com/2017/10/japan-greatest-bubble-time/ There are plenty of "markets" out there: * https://www.bogleheads.org/wiki/Callan_periodic_table_of_investment_returns https://www.bogleheads.org/wiki/Callan_periodic_table_of_inv...