Most all of you guys are missing the point. Japan's bubble was exacerbated by the same 'reflexivity' Soros refers to with respect to other bubbles. Did anyone mention a genuine economic boom here? The strong JPY afforded increased investment in capital/plant assets to reduce the price of goods to export, increasingly accelerate growth, increasing ability to speculate, etc. This wasn't a matter of government simply pumping money supply (like achilles28 is so quick to point out). Do your homework. Their trade surpluses begat even wider surpluses, which begat even more growth (and wealth), fundamentally driving a boom in asset prices. All booms are a function of the amount of the money in the system, but the source of that money varies. In Japan it was genuine economic prosperity via trade (but unsustainable at an exponentially growing rate) that fed the bubble. Our present bubble is another story. Low risk premiums, financial engineering (faulty), deregulation, and generally unrealistic pricing of risk fueled our credit created money supply to prop up prices. No reason the fear, the US govt is replacing the credit created money supply with outright money printing in a rate Japan never *EVER* approached. Everyone is quick to knock Japan, but their personal savings fundamentals are partially responsible for lack of stock price buoyance. Every dollar or yen hoarded in cash, and thus Japan's dilemma is very different from ours. We do the opposite, spending every dollar we earn, in addition to borrowing from the future to spend even more. Stories and charts rhyme, but they all tell different stories, and expecting the same outcome is foolish. We're a lot more vulnerable to hyperinflation/inflation than Japan btw, just due to our embedded borrowing habits. Look at Japanese historical money supply data - it looks nothing like ours, and appears downright restrictive in comparison. The debt to gdp ratios don't tell the whole story, since they exclude personal wealth and debt levels held outside government coffers. None of this data is useful by itself in a vacuum.
Why would you buy corporate debt in this area of dubious credit? Preferreds still are the no. 1 on the food chain.
Recover is a relative term in that the market did rally from the lows of 7000 ish to around 19k which is more than double and a lot of people made good scratch from that. The same way people buying in now have a chance to make some good cash as well. Worry less about absolute tops and more where the current value is.
Because you, me and Uncle Sam are going to back them. With rates going lower in a deflationary environment, spreads will remain wider albeit off a much lower base.
Must've been distracted ... Revised: 'No reason to fear, the US govt is printing money much better than the Japanese ever envisioned.'
The anser is quite simple and can be found in demographics. Part of the reason is that the demographic that consisted of stock buyers who reached their peak in 1989, could not be replenished by the next generation. Instead of looking at monetary policy, consider what will happen when the boomers retire. The next generation is a) not as great in number b) more in debt than the boomers were. It doesn't get more deflationary than this. And now that the credit markets have lost confidence, the fed may have lost the power to prevent the upcoming deflationary shit storm. Just take a minute and look at the following chart, it says it all. And this doesn't just apply to stocks but to all asset classes. Liquidate. NOW.