Thread by @NeckarValue

This is from 1988, the beginning of the final leg of the Japanese bubble. Reminder that you can always find bull and bear arguments and rationalize what's going on.

News was good

Flows were good (money on the sidelines..)

What about valuation?
Actually, it's not as a bad as portrayed by bears because, wait for it, accounting is distorted

Look at cash flow, not earnings. It's not at "lunatic levels." But still 2x the US

Valuations may be high, but have you heard about the low interest rates?

The man who translated Ben Graham into Japanese thought "Western methods of valuation" were "wholly inappropriate."

Instead, look for potential for improvement (not a bad idea per se)

What about those crazy valuations? Portrayed as one-off, "when strong flows meet low float"
But also: banks went up 10x?

Mentioned in passing: government already pushing back on the massive real estate bubble

"They" were active during the 1987 crash. And "they" were interested in preventing losses.

Wild: they allowed some funds and companies to report stocks at cost or remove losers from reporting in an effort to bolster confidence

"What to buy in the Tokyo market" (aka what to buy in a bubble)

Forget value, look for excitement.
"Japanese like stocks with a story"

Also: indirect plays on real estate. Buy steel company for the land.

"Those foreigners are notoriously fans of low P/E"😂

For a write-up of the Japanese bubble check out @CapitalVoss

https://twitter.com/NeckarValue/status/1389185123187363840

@CapitalVoss And for a trader's perspective, check out my write-up of Paul Tudor Jones shorting the Japanese bubble.

neckar.substack.com/p/stalking-bub…