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Japan like Bubble Burst

Some of the recent economic indicators are lining up with what we saw in Japan in the late ’80s, prior to the massive stock crash which led to what’s known as “the Lost Decade”.

It’s wise to pay attention to some of the warning signs that might be out there.

The collapse of the Japanese stock market in the early ’90s should always be in the mind of equities traders. Not just because it was dramatic, but even almost thirty years later and massive amounts of fiscal stimulus, the Nikkei has still not recovered.

This goes against conventional wisdom for investment that indices, on average, grow over the long term.

Why We Should Worry

Generally, the cause of the Japanese Asset Bubble (and subsequent burst) is still a subject of extensive debate. In fact, as GB Shaw said, “if you laid out all the economists in a row, they’d never reach a conclusion.”

However, the main consensus is that stock prices moved higher, well out of proportion to ...

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