Japan’s deja-vu feeling

This is terrifying because exports to the U.S. dropped by 50%, and as a result Japan for the first time in 26 years actually recorded a trade deficit. This is shocking and unheard of. Now the slow-down in demand and cutbacks on spending in the U.S. is trickling over to the rest of the world and hurting the Japanese economy. (Describe what happened in the late 1990s with the Japanese economy going bust.) What happened in Japan in the 1990s is very similar to what’s happening in America right now in the sense the banks made loans and hold assets and the assets declined in value. The big difference is that Japanese banks predominantly held real estate loans. In America it’s not just housing loans but also derivative projects that’s over and above a simple mortgage loan which is why America spiraled into this death trap more quickly than Japan. (To what extent could the Japanese economy of the late 1990s, in terms of impact, be compared to the U.S. economy right now?) There is no comparison. Japan at best is about 8-9% of global growth so this is a very different scale. Plus, Tokyo never was a global financial center. America is THE global financial center. (So you now run an investment advisor company. What are you telling your clients right now?) Cash is king. We’ve got a lot of uncertainty and huge challenges to the global financial system, so it’s too early to dip your toes in. but the world is not ending. There will be restructuring and consolidation, but there’s a wonderful speed with which this is occurring.