Japan Continues its Race to the Bottom

As of September 9th, the economic news out of Japan remains bleak, but you wouldn’t know it from looking at their stock market. Japanese GDP contracted at an annualized rate of -1.2% (April-June) versus an estimated rate of -1.0%. Capital spending (CAPEX) declined by 0.9% versus the original estimate of -0.1%. On the political front, Mr. Abe won a second term and he “wants to spread the felling of recovery to every nook and cranny on Japan”. From that, you can read “even more quantitative easing lies ahead”.

As against that news, China is aggressively stimulating to kickstart what is increasingly becoming a moribund economy. However, that news lifted the Japanese stock market up by some 7.7% on the day in the hopes that strength in China will spill over into Japan which has definitely been mauled by the weakness in China.

My ‘take’ on all of this is that the insolvency-induced slowdown of Japan is having its effects on the real economy but the flight to equities to escape the effects of its ‘mathematical bankruptcy’ (a solvency ratio of lower than .289 for the entire economy) continues unabated. The currency collapse and general economic malaise is all well and good to talk about while wringing your hands, but money has to go somewhere and the stock market (hard assets) remains the only place to go.


About rosshealy

C. Ross Healy, MBA, CFA Chairman, Strategic Analysis Corporation Ross Healy began his investment industry career in 1965 as a securities analyst for Midland Osler Securities. He was a co-founder of Sceptre Investment Council in 1970, a leading Canadian money manager. In 1984, he became Director of Research at Merrill Lynch Canada, and during this time provided support for the late Dr. Verne Atrill, the theorist who decoded the mathematics underlying the Theory of Accounting Dynamics upon which the Strategic Analysis Corporation (SAC) methodology is based. After supporting and collaborating with Dr. Atrill for many years, he joined SAC as Chairman and CEO in 1989 following the death of Dr. Atrill. Ross Healy is a past president of the Toronto CFA Society, and served on the board of the Financial Analysts Federation (now the CFA Institute) as Chairman of the Financial Analysts Journal committee, the academic arm of the CFA Society. He has served on the Financial Disclosure Advisory Board of the Ontario Securities Commission, and was a member of the Executive Committee of Trinity College, University of Toronto, chairing the Investment Committee. He currently serves as the Chairman of the Board of Trustees of Eglinton St. George’s United Church of Toronto. He contributes investment analysis to print, radio, and television media, and has been appearing regularly on Business News Network (BNN) for the past 15 years, and the Canadian Broadcasting Corporation (CBC). There is an award-winning book written about his analysis leading up to the collapse of Nortel Networks (The Bubble and The Bear, How Nortel Burst the Canadian Dream, by Douglas Hunter, Doubleday Canada, 2002. He was the “Bear” in the book.). Email Address: rhealy@strategicanalysis.ca Company Website: www.strategicanalysis.ca Telephone (work): 416-498-3604 x 133 Cell: 416-258-8342
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