You have to be careful drawing parallels between our current bubble here in the U.S. and Japan’s bubble of the late-80s. Recall that at the peak of Japan’s bubble, the Nikkei traded at well over 100x peak earnings and there was commercial real estate being valued at $150,000/sq.ft. (you read that right). The few square miles around the Imperial Palace in Tokyo were worth more than the entire state of California. Our bubble isn’t in the same galaxy as the Japanese bubble from a price/value disconnect perspective. And while Japan’s savings rates were (and are) higher, they also obliterated a much larger chunk of their savings when the bubble burst.
We have a credit/asset bubble. And the aftermath will be ugly and painful. But I wouldn’t bet on real estate or stock market values being lower in 15 years than they are today, although investors are probably going to be extremely disappointed with returns on these asset classes over that period.
