As a torchbearer for long-term investing I’ve heard the phrase now show Japan about a million times.
Those three words were one of the biggest inspirations for me writing Risk & Reward.
How could you possibly invest for the long-run in stocks when a situation like Japan exists?
It’s a fair question.
Japan is the subject that has come up the most times in all of the interviews I’ve done for the book as well.
Are we in a bubble just like Japan was?
Isn’t Japan the exception to the rule of long-term investing?
Could that happen here too?
I find the topic of Japan’s boom and bust to be endlessly fascinating. Surprisingly, there aren’t a ton of books out there on what I feel is the biggest financial asset bubble in history.
The least I could do is write two chapters on the topic to give you a better sense of what happened.
My initial pitch to Harriman House on the book was giving every topic it’s own yin and yang (risk and reward) chapters. One chapter would cover a historical risk in the markets to show how bad things can get. The follow-up chapter would provide some context about those risks and offer different ways to protect yourself.1
The two chapters on Japan were my favorite to write.
Let’s look at some data from the book to now show Japan.
The boom times were beyond silly:
So were the valuations:
This next chart is very important:
Long-term investing did work in Japan!
The problem is the returns were so compressed into the 1970s and 1980s that the performance in the subsequent decades had to be downright terrible to even things out.
There’s a lot more context, stories, data and explanations in the book.
Buy yourself a copy if you would like to learn more about the biggest bubble in history:
