James Glassman made waves today when he (re)released his famous “Dow 36,000” declaration. A 150% rally in the Dow seems a bit over the top, but who knows any more? After all, what we’re seeing in Japan is (at least temporarily) throwing conventional wisdom entirely out of the window. In Japan we have a government that has now pledged to do “whatever it takes” to get the economy going again. And that means everything from fiscal stimulus to aggressive monetary policy to currency devaluations to stock market “wealth effect” targeting.
In this case, Japanese officials have done something unusual by saying that they’d like to see the Nikkei at 13,000. I don’t know what you call that. Maybe “wealth effect targeting”. Who knows anymore? Certainly not me. But whatever is going on, it seems to be working to some degree as the Nikkei is up another 2.5% overnight to 12,250. For those keeping track, that’s up from about 8500 in Q3 or about 45%. Those Japanese sure are wealthy now!
But it makes you wonder. If economic “prosperity” is so simple then why not just have central banks name target prices all over the world? Then when a few thousand people place orders at those perceived prices we can all “feel the wealth”. Of course, here’s to hoping that everyone doesn’t try to hit the bids at the same time to cash out on the “wealth effect”. That would create a “poverty effect” and we wouldn’t want that. But hey, this is a fun experiment. Here’s to hoping it works out in the long-run. If so, maybe none of us can work in the future and we can just have a central banker tell us what underlying production of everything is “worth”.
PS – This should go without saying, but do me a favor and don’t short the Nikkei. At least not yet.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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