Have We Seen This Picture Before?

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We lived in mid-town Manhattan in the mid-1980’s when the Japanese were actively buying trophy properties. We could look out our 59th story windows and see several iconic New York landmarks that had recently changed hands. In the same era, Japanese buyers acquired the renowned Pebble Beach golf complex to fulfill the golfing dreams of well-to-do businessmen traveling to this country.

Those old enough to remember may recall that Japan at the time seemed to have developed the new industrial paradigm. Japanese companies dominated the electronics industry. Detroit-made automobiles were considered second-rate compared to their Japanese competitors.

Japan was truly a country with an unlimited future. At the end of the 80’s, the Nikkei index measured the progress of the world’s largest stock market by capitalization. The Nikkei closed the decade at just about 39,000.

After powerful rallies over the past several years, that same Nikkei has recently climbed above 16,000–still down almost 60% from its 39,000 high a quarter century ago. Japan continues its desperate attempt to extricate itself from the deflationary malaise that characterized a significant portion of the most recent 25 years.

Today we read about Chinese buyers picking up the venerable Waldorf Astoria hotel for just short of $2 billion. Although we can no longer look out our windows at the latest trophy acquisition, there is a clear sense of déjà vu. With obvious parallels between Japan and this most recent Asian power and its growth prospects, it’s worth leaving some room for doubt about the inevitability of a coming glorious period of economic domination.

Just saying.