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Friday, October 21, 2011

Is the Nikkei that bad?

Japanese stocks have performed badly since, ... well since what seems forever. Looking from a long term buy-and-hope strategy, had you invested in the NIKKEI in 1984 your returns would be around nada. No matter how much we complain about our financial markets and their crises, had you invested in the S&P500 you would be sitting in a 600-700% return.

 From a shorter term perspective, say after the dotcom bubble, results are similar. Japanese stocks underperform US equities. Does this mean that investors should avoid Japanese stocks? Not really. Look in the same chart how the JPY/USD is doing.

Oversimplifying calculations, and assuming that an American investor put 10,000 USD (around 1,333,333 JPY) in the Nikkei in 2002, he/she would be sitting on a20%equity loss. Today he/she would only have 1,066,666 JPY, which at the current exchange rate (75 JPY/USD) would be 14,222USD…

I don’t know about you… but I would take it.

Is the Nikkei that bad? Not if you are an American.

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