Big in Japan

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"Big in Japan"

I don’t know much about investing. I’ve generally felt that the twin pearls of wisdom that you can’t beat the market (and shouldn’t try) and then equities go up in value over the long run were good enough for me. Recent events, have, however, drawn my attention to the sad case of the Japanse stock market that appears to call at least one of these principles into question:

Megan McArdle wrote yesterday:

The Nikkei peaked at 38,915.87 on December 29, 1989. For years, it’s been a watchword warning to people who say “in the long run, stocks always go up”; in the past two decades, it has struggled back towards 20,000 several times, but never anywhere near its former peak. Today, it went even further, falling to a 26-year low. The yen has been strengthening fast against the dollar and other currencies, which is very bad news for Japanese exporters.

But, really, where does this leave the idea that stocks go up in the long-run? The weird thing about it is that though one knows Japan has had some rough economic times, the situation hardly seems as cataclysmic as the stock trends make it out to be. It’s not as if the country’s been bombed into smithereens or suffered wars and revolution. People aren’t starving in the streets. Japan’s citizens continue to enjoy some of the highest living standards in the world. They’re number eight on the UN Human Development Index. They’re ahead of France, Germany, Italy, and Spain in per capita GDP. They have the longest life expectancy in the world. In the greater scheme of things they’re doing fine. And yet the stock market — not so much.

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