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Yen bulls feel their oats, pressing bets despite official threats to take measures to weaken the...
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Sunday, June 3, 2012, 9:04 PM ETYen bulls feel their oats, pressing bets despite official threats to take measures to weaken the currency. Focusing on the nominal value of the yen is misleading, say strategists. Persistent deflation means dollar/yen would have to fall to ¥55 (from ¥78 today) for the yen to equal its strength of the mid-90s. Meanwhile, the Topix is off 2.2% tonight - if it holds, it will be the lowest close in 3 decades.
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The party's over.
bummer....i was still drinkin.
The reality is that the Japanese stock market spent a lot of time in extremely overpriced territory; no one should be willing to pay 50x normalised earnings and the entire market should never have a dividend yield well below 1%. The market in Japan today doesn't look much like it did in 1990 or 2000; prices are less unreasonable. More to the point, though, the market prices tell you nothing about the performance of the underlying businesses or the distributions made to shareholders. Much is made of the 80%+ decline in the indices, but it's rarely mentioned that there was no corresponding decline in distributions. Anyone who was happy paying the prices they did for Japanese stocks in 1995 or 2000 or 2005 should be thrilled to buy more of those same stocks today: they're receiving more income from them today, yet their prices are lower.
The correct conclusion isn't that one should avoid owning anything in Japan but rather than one should avoid paying 50x earnings and 150x dividends for stocks. One would think that obvious, but the chart says it must not be obvious enough.