This crisis is not like Japan’s
There seems to be a growing consensus that the biggest threat facing the world is a Japan-style deflationary depression and 15-year bear market. I can see why. But in truth, the economies and the markets of America and Britain really don’t look much like those of Japan in the early 1990s.
Take the stockmarket. When the Nikkei peaked it was on a p/e of not far off 80 times. Five years later it was 60 times; even ten years later it was still around 40 times. These stupid numbers were constantly justified by analysts and equity sales people (myself included, I’m sorry to say – I was young and trusting) on the basis that the very low bond yields made them make sense. They didn’t, of course – as the market taught us over and over during the long bear market. Indeed, only in the last few years have valuations in Japan returned to levels that make them look properly cheap. It isn’t taking that long here.
• Read the full editor’s letter here: This crisis is not like Japan’s