A Second Lost Decade?

One question you may read every now and then is whether the US is headed into a lost decade like Japan. Then this morning I saw somewhere a commentary about Japan being in its second lost decade. Japan has been in a funk suffering from elements of deflation, too much savings, failure to take writedowns and the seemingly endless lack of economic health.

In terms of navigating the capital markets with your portfolio, trying to figure out whether the US is turning into Japan may not be a productive use of time. A better use of time might be to figure what you would do IF WE BECOME JAPAN.

Over the last 20 years Japanese investors have needed to save and invest for their futures just like we have. The Japanese market has been a terrible investment over that time—the Nikkei is down 75% from 1989 levels. This has forced Japanese investors to buy elsewhere.

As part of an ongoing theme to my writing this is what US investors may face. Japan is viewed as some horrible fate awaiting us and while that might be the case (I don’t know) Japan has not had perpetual rioting in the streets, shocking homelessness and unemployment rates.

Some sort of Japan redux here would have serious and far reaching consequences to be sure but a complete shredding of the social fabric is unlikely to be one of them. In terms of investment implications; other parts of the world will soldier on with or without the US. With the US would probably create an easier path for everyone but regardless of what happens in the US, global living standards (diet and basic amenities) will continue to improve at some pace. This benefits the countries where it is occurring and most of the countries providing the means to that improvement.

More than anything else I think of this as a problem to be solved not the end of the world.