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Thursday, August 4, 2011

The Haunting TOPIX Chart We Can't Let Go Of


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Thursday, August 4, 2011
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The Haunting TOPIX Chart We Can't Let Go Of

Politicians like to compare America to Greece, but in reality the TOPIX, with its long, deflationary slog is our best historical analogy.

A chart we've run before, but which seems particularly relevant, is the above chart from Morgan Stanley, which shows the TOPIX -- post bubble -- responding to various stimuli and counter-stimuli.

The basic lesson: throughout the long bear market, stocks always popped after fiscal and monetary stimulus, and worsened when policy makers did the opposite.

Given how this market has coincided with a move towards de-stimulus (the debt ceiling/fiscal consolidation deal) we can't help but think this is playing out again here. Read »


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