“People say the U.S. isn’t like Japan 10 years ago,” Societe Generale strategist Albert Edwards wrote in a note to clients today. “I agree. Actually it’s WORSE!”
Mr. Edwards has been making Japan comparisons ever since the dot-com bubble burst. Many people disagreed with such assessments, pointing out that U.S. banks and real estate were in far better shape. That’s not the case anymore, says Mr. Edwards, who also notes that Japan didn’t experience a real credit crunch until years after the bubble burst in 1990. And while there’s a view that Japanese banks were glacial when it came to writing off bad loans, part of the problem was that bad loans kept on turning up as the situation worsened. Sound familiar?
Fed’s unprecedented action has only delayed market clearing Japanese style and certainly does not mark a definitive bottom.
Investors should, therefore, use any classic bear market rally led by the financials to sell any Western financial stocks they still own
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