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The Democratic Party of Japan is about to make a momentous choice. Next week’s contest for the party leadership also decides who holds the office of prime minister. The contrast between the two candidates could not be starker.
The Democratic Party of Japan is about to make a momentous choice. Next week’s contest for the party leadership also decides who holds the office of prime minister. The contrast between the two candidates could not be starker.
The Greeks have got a lot to answer for. As well as roiling the markets and torpedoing the euro, they have inflicted serious damage on the debate about the global crisis and its remedies.
Imagine you are starring in the financial equivalent of the “Life On Mars” TV show. You wake up one morning to find you have time-travelled back to the early nineteen nineties. The Berlin Wall has just fallen. The triumph of capitalism is unleashing a tsunami of globalization as billions of people join the market economy as workers and consumers.
A leadership change in Japan passes almost unnoticed these days, but the ascension of Naoto Kan to the role of prime minister could have a long-lasting impact on the strategic landscape.
Di-worsification is what you do when you invest in mediocre assets for a mediocre reason – for example, because a statistical model has told you they reduce risk. Thanks to the boom in commodities over the past decade, they have become a favoured choice for di-worsifying institutions everywhere. The profusion of ETFs, funds, indices, and brokerage coverage has made them unprecedentedly easy to access for individuals too. However the long-term performance of commodities is pathetic, and there is little reason to believe that “this time is different.”
Emerging markets, it seems, have had a good crisis. In contrast to the debt-ridden G7 economies, they have quickly resumed their growth trajectory. No surprise, then, that US emerging market mutual funds are experiencing record inflows. The stellar performance of the Brics markets – Brazil, Russia, Indian and China – is due to continue into the distant future.
There’s more to Japan’s new first couple than meet the eye. The prime minister’s wife, Miyuki Hatoyama, claims to have befriended Tom Cruise in a previous life when he was, apparently, Japanese. Meanwhile the prime minister himself has been behaving like the re-incarnation of a French intellectual.
A notable phenomenon of this past year of living dangerously in financial markets has been the triumph of the ultra-bears. Deeply pessimistic commentators such as Nourel Roubini who were previously unknown or had only niche followings have been propelled to rock star status.
It’s déjà vu all over again. That’s what the rip-roaring bull market in Chinese stocks looks like to anyone who lived through the late 1980s Japanese bubble.
The performance of the Chinese market now comfortably exceeds that of other classic bubble markets – Japan in the late 1980s and TMT in the late 1990s. Bubble markets have much in common, including the inevitable denouement.