Msccube

US Economy Still Has a Ways to Go

I think the US equity market is facing serious problem.

Let us compare the current situations with the Japanese situations happened 15 years ago. Japan was facing the burst of bubble economy. They had serious problem with the real estate sector and their banks were carrying huge bad loan.

Japan 15 years ago:

1. Japan was the second biggest economy in the world.
2. Japan was facing the collapse of housing market.
3. Japanese banks were carrying huge amount of bad loan, and the government tried to save the bank.
4. Japan had excellent industrial bases.
5. Japan has had huge amount of foreign reserves.
6. Japan was not facing high priced oil at that time.

Today's USA
1. USA is biggest economy in the world but has larger population than Japan.
2. USA is facing the collapse of housing market.
3. USA bank is carrying huge bad loans, and facing credit crisis. The same as Japan, the government wishes to save the banks.
4. USA has excellent industrial bases.
5. USA has huge amount of foreign debt, the largest in the world. Don't even think of any foreign reserves.
6. USA is facing high priced oil today!

I would say that it makes sense to short S&P 500 and S&P financial index. After 15 years, Japan is not completely recovering from their problems although things are going better.