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Darrel Whitten on the Nikkei’s nosedive

October 28, 2008
By Ken Worsley


Over at Seeking Alpha, Darrel Whitten has published a must-read take on the Nikkei’s recent nosedive. Entitled “Japan’s ’80s ‘Bubble’ Has Completely Deflated - and Then Some,” the piece includes this incisive passage:

On Monday, October 27, 2008, the Nikkei 225 index closed at 7,162.90, its lowest point since October 7, 1982, before the infamous 1980s bubble began. The trailing P/E multiple for the Nikkei 225 was 8.58X and the forward multiple 9.53X, while the Nikkei 225 PBR was 0.87X, while forward dividend yield was 3.07% versus a historical dividend yield of 2.97%. The Nikkei’s earnings yield (inverse of the P/E multiple) was 10.47% on historical earnings and 9.92% on forward earnings, while the market’s ROE was 10.1% on trailing earnings and 9.1% on forward earnings—versus a JGB (Japanese government bond yield) of 1.47%. In other words, market valuations are also back to pre-bubble valuations that existed some 30 years ago.

The full article is here.

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Comments

One Response to “Darrel Whitten on the Nikkei’s nosedive”

  1. Pascal Jeannenot on November 4th, 2008 5:45 am

    ‘Ultra-strong’ Yen is not the appropriate wording for correctly assessing Japanese currency historic implied volatility turnaround ( against all major trading partners).
    Japanese currency has regained implied volatility alongside it logical trade weighted average status such ending 20 years downward trend and probably paving the way for 10 years upward cycle.
    I agree that whatever fundamental indicator is used as those mentionned in the above article (to which you can add Dividend Yield) Japan has entered extreme historic oversold territory discounting in advance at least 2 years of earnings contraction. However key point remain both foreign and domestic supply demand balance. For the later I believe Japanese currency recovered implied volatility will eventually act as support factor.
    Long term high pain tolerance level is a luxury few can afford.

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