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Holly LaFon
Holly LaFon
Articles (5738) 

Japan's the Way to Play Emerging Markets: Wilbur Ross

November 04, 2011 | About:


Kirrct premium member - 4 years ago

amen! check out AIT corp (ticket 9381: JP). the company is a logistics company similar to Expd (but much smaller). something like 40% of it's market cap is cash, no debt, pays a dividend (yield ~5%); ROA and ROE over 20%. I'm long this stock.


AlbertaSunwapta - 4 years ago
A great new perspective! And it avoids the never-ending issues with the aggregate market.

Over the years, I played the Japanese WEB/ETF (EWJ) and a couple Japanese equities with some success, but have come to the conclusion that their growing debt situation creates too much unpredictability and currency risk. My best guess now is that their equities will recover but commensurately, there may be a significant fall in the yen which would erase much of the market gains to foreign investors. (Canadian investors faced the same situation investing in the US as the markets bottomed in 2008 - 2009.) So my next buy may be half in a currency hedged Japanese ETF and half in EWJ.

In the past, the debt, which is mostly domestically held, hadn't caused me a lot of concern and I couldn't understand the world's fear and avoidance of the Nikkei. They were acting like a self financing conglomerate, basically keeping it "all in the family". I guess the issue is that the Japanese government can't 'print-n-devalue' as can the USA and so can't simply shaft foreign lenders. In a sense, Japan is a bit like the EU in that way - simply a dysfunctional family.

To me the problem now is that Japan's debt keeps growing and growing without a lot of underlying economic growth. So going forward I'm not sure what scenario Japan might follow. If it's debt financing goes international in a big way, I've always thought that it should be the US etc, not Japan, that needs to worry. i.e. The Japanese roll their debt into equities driving up their equity markets, and their government suddenly goes international and competes in the bond markets against the US, spiking yields and scaring the hell out of the US, etc. Then what? It goes international and I'd expect the YEN to devalue, spreads to widen, exports to spike, in turn driving up their relatively small export sector (Toyota etc. are only 20% or less of their economy I believe)...

The optimist in me still expects an eventual and major Nikkei recovery but with a high risk of devaluation along the way.

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