Friday, May 31, 2013

Nikkei Bubble Popped

I don't really understand it, but Japanese stocks are the most loved equities in the world right now.  If you forced to buy equities, I would still choose the U.S. over anywhere else.  One of the last places I would put it in is Japan.  There is a reason Japanese stocks have gone nowhere for so long.  The companies just don't make enough profits.  And a big percentage of the Nikkei is in cyclical sectors, much more than the S&P.  And the USDJPY is not going to go up much more here, because if it did, the JGB bond yields would be that much harder to control.  And Japan cannot have JGB bond yields go up much, otherwise the interest payments would be too much to bear.  Japanese domestic economy will have zero growth for a long time, aging population, more competition for exports, I don't know how you put a big P/E multiple on that. 

Right now, S&P looks like the best house in a bad neighborhood, as has been the case for the past 4 years.  But the neighborhood is just getting worse.

Expecting a downtrending day today. 

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