One of the themes that I have been speaking to my clients about for the past few months is the number of parallels that can be drawn between the current economic situation here in the U.S. and what Japan has faced from approximately 1990 until now. This is a long discussion that I need to spend significant time on here as it suggests an investing style that many in the U.S. are not currently following.
This week’s Barron’s magazine has an interview with Stephanie Pomboy, Founder and President, of MacroMavens, a “Manhattan firm analyzes macroeconomic themes and their investment implications”. It’s an interesting interview with a woman who has been a bear for some time.
Of particular note is her comment:
But the economic deleveraging has barely begun, and that’s my longer-term thesis. It all revolves around the idea that U.S. consumers are actually going to do the unthinkable — they are going to save — and that we will be more like Japan than anyone believes is possible.
This implies 20+ years drifting in and out of recession, general economic malaise, and a narrow stock market trading range that overall continues to slope downward. Go to Yahoo! Finance and use the symbol ^N225 to pull up a chart of the Japanese stock market since 1984. It is lower today than anytime since then. 24+ years of lost growth in the second largest economy in the world.
The Durable Investor 