Comments on: IS THE NIKKEI A LEADING INDICATOR? http://pragcap.com/the-us-nikkei-correlation Sat, 26 May 2012 09:29:57 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Rob http://pragcap.com/the-us-nikkei-correlation/comment-page-1#comment-5512 Rob Mon, 31 Aug 2009 13:48:45 +0000 http://pragcap.com/?p=8148#comment-5512 I saw the Bloomberg chart on Friday and came away with two things. First, wow, maybe it is a possibility that this rally continues to 1,300 or 1,400 before a significant decline. No one seems to expect that. Second, is this the general fate of the US and many other world markets? Are we in a longer term secular bear market with some big cyclical bull markets along the way (currently on the second)? Just like Japan following the bubbles bursting. I had been thinking more along the lines, that this is a bear market rally in a three or four year bear market. Maybe March was THE bottom between now and 2011 and maybe not. Either way a test at some point was most likely. This chart made me think maybe this bull continues for a year or two more before reality catches up with it and sends the market to possibly lower lows. If the market does continue up to 1,400 or so during the next year (against all odds), then almost all the bears will have been converted to bulls as they were in October 2007. I saw the Bloomberg chart on Friday and came away with two things. First, wow, maybe it is a possibility that this rally continues to 1,300 or 1,400 before a significant decline. No one seems to expect that. Second, is this the general fate of the US and many other world markets? Are we in a longer term secular bear market with some big cyclical bull markets along the way (currently on the second)? Just like Japan following the bubbles bursting.

I had been thinking more along the lines, that this is a bear market rally in a three or four year bear market. Maybe March was THE bottom between now and 2011 and maybe not. Either way a test at some point was most likely.

This chart made me think maybe this bull continues for a year or two more before reality catches up with it and sends the market to possibly lower lows. If the market does continue up to 1,400 or so during the next year (against all odds), then almost all the bears will have been converted to bulls as they were in October 2007.

]]> By: Mike http://pragcap.com/the-us-nikkei-correlation/comment-page-1#comment-5502 Mike Mon, 31 Aug 2009 01:43:59 +0000 http://pragcap.com/?p=8148#comment-5502 TPC I saw this same article, but came away with a slightly different spin. First, I struggled with the start points being 1989 & 2000. In Japan, after 1989, the Nikkei never again approached it's former high. However, the S&P surpassed it's previous high in 2007. So, for me the comparison is flawed from the beginning. I do think the points in time are similar enough to warrant comparison. Government intervention was the dominant event influencing both economies. Except for the start of the 1989 crash, the remaining "rebounds" were due to government stimulus; which is what I see occurring now. As the stimulus begins to fade in Q4, the economy will slow and earnings will be missed. Japan has shown this pattern for 20 years. I believe the US will do the same. The US consumer is down for the count; and only government intervention will cause the economic metrics to go up. Not an organic recovery. TPC

I saw this same article, but came away with a slightly different spin. First, I struggled with the start points being 1989 & 2000. In Japan, after 1989, the Nikkei never again approached it’s former high. However, the S&P surpassed it’s previous high in 2007. So, for me the comparison is flawed from the beginning.

I do think the points in time are similar enough to warrant comparison. Government intervention was the dominant event influencing both economies. Except for the start of the 1989 crash, the remaining “rebounds” were due to government stimulus; which is what I see occurring now. As the stimulus begins to fade in Q4, the economy will slow and earnings will be missed. Japan has shown this pattern for 20 years. I believe the US will do the same.

The US consumer is down for the count; and only government intervention will cause the economic metrics to go up. Not an organic recovery.

]]> By: Dean http://pragcap.com/the-us-nikkei-correlation/comment-page-1#comment-5501 Dean Mon, 31 Aug 2009 01:18:40 +0000 http://pragcap.com/?p=8148#comment-5501 On the same topic: http://blogs.reuters.com/felix-salmon/2009/08/29/silly-chart-of-the-day-data-fitting-edition/ On the same topic:

http://blogs.reuters.com/felix-salmon/2009/08/29/silly-chart-of-the-day-data-fitting-edition/

]]> By: percolator http://pragcap.com/the-us-nikkei-correlation/comment-page-1#comment-5493 percolator Sun, 30 Aug 2009 20:15:22 +0000 http://pragcap.com/?p=8148#comment-5493 Regarding the B of A analysis (Top Chart). While unlikely, its possible for the dollar to surge 40% against the Yen and the S&P flat lines which would end in the same result. Regarding the B of A analysis (Top Chart). While unlikely, its possible for the dollar to surge 40% against the Yen and the S&P flat lines which would end in the same result.

]]> By: Paul http://pragcap.com/the-us-nikkei-correlation/comment-page-1#comment-5489 Paul Sun, 30 Aug 2009 17:12:36 +0000 http://pragcap.com/?p=8148#comment-5489 Thank you very much Dean and TPC for responding the question I had in "Weekend Reading" when I first saw the 40% pop 10 years apart from a Merrill strategist. It would be truly amazing as Main street is not doing well but the market is up with lots of excess liquidity/printed money. It looks the market short term still wants to go higher due to liquidity and "better than" surprises against negative seasonality and market is dominated by a few major institutions. I thought I saw something about powers that be wanted to push USD higher. If true it could be another factor for a pull back but lots of people thinking pull back so it might never come. Thank you very much Dean and TPC for responding the question I had in “Weekend Reading” when I first saw the 40% pop 10 years apart from a Merrill strategist. It would be truly amazing as Main street is not doing well but the market is up with lots of excess liquidity/printed money. It looks the market short term still wants to go higher due to liquidity and “better than” surprises against negative seasonality and market is dominated by a few major institutions. I thought I saw something about powers that be wanted to push USD higher. If true it could be another factor for a pull back but lots of people thinking pull back so it might never come.

]]> By: Dean http://pragcap.com/the-us-nikkei-correlation/comment-page-1#comment-5488 Dean Sun, 30 Aug 2009 15:43:49 +0000 http://pragcap.com/?p=8148#comment-5488 TPC: Thanks for posting. I hope it is conducive to the animal spirits of a good conversation. TPC:

Thanks for posting. I hope it is conducive to the animal spirits of a good conversation.

]]> By: dorky http://pragcap.com/the-us-nikkei-correlation/comment-page-1#comment-5487 dorky Sun, 30 Aug 2009 13:47:21 +0000 http://pragcap.com/?p=8148#comment-5487 How did you adjust for currency on Yahoo? I can't find a way to do it. How did you adjust for currency on Yahoo? I can’t find a way to do it.

]]> By: vfsvfl http://pragcap.com/the-us-nikkei-correlation/comment-page-1#comment-5486 vfsvfl Sun, 30 Aug 2009 13:21:03 +0000 http://pragcap.com/?p=8148#comment-5486 To my eyes, one fatal flaw here is that one 70s & 80s global market could be in growth mode while another was in recession. America, Japan & Europe markets could be, and were, in different phases all the time. Today, the market is global & this concept no longer applies. (New Chinese credit bubble notwithstanding.) Everyone is looking for, but nobody has found, de-coupling. As shown in your data, the globe is just one big market & they all go up & down together. Further, the "one trade" premise has applied not only to stocks, but also materials, PMs, bonds, real estate, CRE, CDS/MBS/CMBS, credit spreads, etc., etc., etc. This point, of course, does not address the underlying premise of imagining the 2009-10 US market will continue to mirror Japan from 20-odd years ago. In the sense that we're coming out of the same problem & offering many of the same failed solutions, it seems possible. However, in my view, they are way too many "different" variables (see fatal flaw(s) above) for the similarities to be assumed as continuing. To my eyes, one fatal flaw here is that one 70s & 80s global market could be in growth mode while another was in recession. America, Japan & Europe markets could be, and were, in different phases all the time.

Today, the market is global & this concept no longer applies. (New Chinese credit bubble notwithstanding.) Everyone is looking for, but nobody has found, de-coupling. As shown in your data, the globe is just one big market & they all go up & down together. Further, the “one trade” premise has applied not only to stocks, but also materials, PMs, bonds, real estate, CRE, CDS/MBS/CMBS, credit spreads, etc., etc., etc.

This point, of course, does not address the underlying premise of imagining the 2009-10 US market will continue to mirror Japan from 20-odd years ago. In the sense that we’re coming out of the same problem & offering many of the same failed solutions, it seems possible. However, in my view, they are way too many “different” variables (see fatal flaw(s) above) for the similarities to be assumed as continuing.

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