Monday, November 21, 2005

Early 90's Nikkei crash compared to Nasdaq dot-com crash




The above chart is the early 90's Nikkei crash compared to the Nasdaq dot-com crash. You can click on the image to enlarge it. I wanted to post this up here as food for thought for the people who believe that historical precendent has at least some predictive value. I am one of those people.

I have lined up the peaks of both booms to make it easy to see that the two bubbles have behaved similarly. It is interesting how many characteristics the price movements of the two bubbles have in common. Most importantly, after the Nikkei had an "echo boom," it crashed again, ultimately surpassing the lows of the original crash. By comparison, the Nasdaq is at the heigh of its "echo boom." Will it crash even lower than the 2002 lows? I don't know but it is certainly one of the more likely scenarios in my opinion. If next year's Nasdaq follows the Nikkei precedent, then this is not a bad time to begin building short positions (not advice).

6 Comments:

At 10:32 AM, Anonymous Anonymous said...

FYI typo: heigh = high

Thanks. :)

 
At 7:42 PM, Anonymous Technicator.NET said...

Hey,the Nikkei's index may not be ahead, but behind. the crash of the nikkei is a slower version of the american market crash. Notice that the full crash is both just over 80% of orginal value. What do you think?

 
At 7:43 PM, Anonymous Technicator.NET said...

Let me add: If that's true, the the nikkei will appreciate then flatten like Nasdaq.

 
At 6:35 PM, Anonymous Riz (ABOBtrader) said...

I agree that looking at history has value, even if it doesn't repeat quite as we would like.

Nevertheless, given the washout of fluff from the bursting of the tech bubble, if the index was to take a major tumble and approach anything near its previous lows, I for one would be a buyer.

The Nikkei crash was accompanied by a prolonged and deep recession. Its difficult to see that happening in the US, though some would point at the soon-to-be inverted yield curve and say otherwise.

 
At 8:58 PM, Blogger Gordengekko said...

Jon-

I suggest you read The Next Great Bubble Boom 2005-2010 by Harry S. Dent
All I can say is it is very informative.

Gekko

 
At 12:09 PM, Blogger Gordengekko said...

Jon-

Here is a link to that book. He talks about about Japan and compares us to Japan.

http://www.amazon.com/gp/reader/0743222997/ref=sib_dp_pt/002-5790373-3879235#reader-link

 

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