The ultimate permabear and permabull agree on one thing – Japan is a buy. In an interview over the weekend Warren Buffett told reporters that Japan is a good value and should do well over the long-term. You can see the interview here:
David Rosenberg of Gluskin Sheff agrees. In this morning’s research note he explains the “Japan is cheap” thesis:
“LOOKING FOR VALUE? TRY JAPANESE STOCKS This was true before the massive tsunami and earthquake, and just as true now "? yes, GDP is about to take at least a 2% hit but keep in mind that the Japanese stock market more than fully reflected that prospect at mid-week when it slid 20% in what was the worst decline over such a short time frame since the 1987 crash. Implied volatility on the Nikkei soared from 21 to 70 "? within striking distance of the 92 peak reached after Lehman collapsed. To show just how far the market went in a classic case of shooting first and asking questions later, at one point last week CDS spreads were priced such that Japan was viewed as a greater default risk than Mexico or even Panama. I mean, there is no doubt that Japan has a massive government debt loan (200% of GDP) and that is about to get even larger but 95% of that debt is held by the country's own residents.
We are always wary of front covers, but Barron's may well have this one pegged. Global markets are now priced at twice book value, double what it is in Japan. The weekend WSJ made the point that on a 10-year cyclically smoothed basis, the Nikkei is trading at a P/E multiple of 14.5x, which is about the cheapest the market has been in over 40 years. As the weekend WSJ points out, the Japanese and U.K. equity market capitalization levels are roughly the same and yet global mutual funds and ETFs have 25% less of their assets in Japan (Morningstar data).”
Source: Gluskin Sheff
The Japan MSCI Index (EWJ) is now only down ~8% from the closing high, and most US indices are off 3-4% from their 2011 highs.
Ironically, all these events may just be the catalyst the market needed to further climb the “wall of worry”. If Japan & MENA were not on the front burner, there would have been a strong argument that the market needed a breather – overbought, overbullish and valuations beginning to look stretched on normalized earnings, profit margins.
It seems that most investors have even forgotten about the oil spike and what that could mean to the consumer living on the margin.
Mmmmmmm….. Since summer 2009, i heart calls which said “Japan is a buy”. Just take a look at NIKKEI since that time. A stock, an index is not a buy because it is cheap. It is a buy because its forward-looking perspectives seems good.
Before 11 march, Japan was an over-in-debt country, with a catastrophic demographic, in deflation since 2 decades. What has changed now ? BOJ will make a huge QE for rebuilt, that is the positive side. The negative side is their industry will loose market share to the emerging neighbours, who will rush in the opportunity of the supply chain disruption to acquire additional market shares. At best, the 20km area around Fukushima will be declared “dead zone” for at least 10 years, and the Japanese population won’t buy any food from the north of the island.
Japan will be a tactical buy when the Nikkei will be around 2009-low level, and for a tactical ride with a hedge against a declining yen. If you compare 11 march to Kobe-94, the Nikkei will need to go a lot lower before recovery. This time is different ?
Why should I buy Japan???
As Greedsgood noticed, EWJ is only down 8% from the resent peak; SPX down 4%. We did not have any tsunami here; SPX exposure to Japan is small… More than that, EWJ now is UP 16.5% from it’s June/July 2010 low!!!!! So, what was in Japan back in June 2010, which, as it appears now, was the equivalent of 3 tsunami and nuclear blowouts???? And this is all happening while oil rallied 48% since June 2010. How dependent on oil is Japan now?
If i am a believer in global recovery, I’d stay with US equities. If I am not, I’d rather short both US and Japan….
i’ve heard the japan is cheap argument for over 10 years probably more. i also remember BCA saying it is time to get back into risk assets particularly japanese stocks. guess when and what level? right after big ben’s first panic rate cut with nikkei around 17k. nice call BCA
What a crock of $#^%. Rosy is wrong. Who gives a $#^% about Buffett.
Japan has been a struggling investment for a very long time. A disastrous earthquake, tsunami and reactor failure haven’t made things any better. It’s the “broken window” fallacy at work with Rosenberg and Buffet. The Kobe earthquake in the nineties didn’t improve Japan’s long term investment situation; why should this current calamity?
Oh my God!!! Rosemberg is buying anything.
does that mean buffet is looking for some sweet, can’t lose, government backed deal in japan?
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The ultimate permabear and permabull agree on one thing – Japan is a buy. In an interview over the weekend Warren Buffett told reporters that Japan is a good value and should do well over the long-term. You can see the interview here:
David Rosenberg of Gluskin Sheff agrees. In this morning’s research note he explains the “Japan is cheap” thesis:
“LOOKING FOR VALUE? TRY JAPANESE STOCKS This was true before the massive tsunami and earthquake, and just as true now "? yes, GDP is about to take at least a 2% hit but keep in mind that the Japanese stock market more than fully reflected that prospect at mid-week when it slid 20% in what was the worst decline over such a short time frame since the 1987 crash. Implied volatility on the Nikkei soared from 21 to 70 "? within striking distance of the 92 peak reached after Lehman collapsed. To show just how far the market went in a classic case of shooting first and asking questions later, at one point last week CDS spreads were priced such that Japan was viewed as a greater default risk than Mexico or even Panama. I mean, there is no doubt that Japan has a massive government debt loan (200% of GDP) and that is about to get even larger but 95% of that debt is held by the country's own residents.
We are always wary of front covers, but Barron's may well have this one pegged. Global markets are now priced at twice book value, double what it is in Japan. The weekend WSJ made the point that on a 10-year cyclically smoothed basis, the Nikkei is trading at a P/E multiple of 14.5x, which is about the cheapest the market has been in over 40 years. As the weekend WSJ points out, the Japanese and U.K. equity market capitalization levels are roughly the same and yet global mutual funds and ETFs have 25% less of their assets in Japan (Morningstar data).”
Source: Gluskin Sheff
The Japan MSCI Index (EWJ) is now only down ~8% from the closing high, and most US indices are off 3-4% from their 2011 highs.
Ironically, all these events may just be the catalyst the market needed to further climb the “wall of worry”. If Japan & MENA were not on the front burner, there would have been a strong argument that the market needed a breather – overbought, overbullish and valuations beginning to look stretched on normalized earnings, profit margins.
It seems that most investors have even forgotten about the oil spike and what that could mean to the consumer living on the margin.
Mmmmmmm….. Since summer 2009, i heart calls which said “Japan is a buy”. Just take a look at NIKKEI since that time. A stock, an index is not a buy because it is cheap. It is a buy because its forward-looking perspectives seems good.
Before 11 march, Japan was an over-in-debt country, with a catastrophic demographic, in deflation since 2 decades. What has changed now ? BOJ will make a huge QE for rebuilt, that is the positive side. The negative side is their industry will loose market share to the emerging neighbours, who will rush in the opportunity of the supply chain disruption to acquire additional market shares. At best, the 20km area around Fukushima will be declared “dead zone” for at least 10 years, and the Japanese population won’t buy any food from the north of the island.
Japan will be a tactical buy when the Nikkei will be around 2009-low level, and for a tactical ride with a hedge against a declining yen. If you compare 11 march to Kobe-94, the Nikkei will need to go a lot lower before recovery. This time is different ?
Why should I buy Japan???
As Greedsgood noticed, EWJ is only down 8% from the resent peak; SPX down 4%. We did not have any tsunami here; SPX exposure to Japan is small… More than that, EWJ now is UP 16.5% from it’s June/July 2010 low!!!!! So, what was in Japan back in June 2010, which, as it appears now, was the equivalent of 3 tsunami and nuclear blowouts???? And this is all happening while oil rallied 48% since June 2010. How dependent on oil is Japan now?
If i am a believer in global recovery, I’d stay with US equities. If I am not, I’d rather short both US and Japan….
i’ve heard the japan is cheap argument for over 10 years probably more. i also remember BCA saying it is time to get back into risk assets particularly japanese stocks. guess when and what level? right after big ben’s first panic rate cut with nikkei around 17k. nice call BCA
What a crock of $#^%. Rosy is wrong. Who gives a $#^% about Buffett.
Japan has been a struggling investment for a very long time. A disastrous earthquake, tsunami and reactor failure haven’t made things any better. It’s the “broken window” fallacy at work with Rosenberg and Buffet. The Kobe earthquake in the nineties didn’t improve Japan’s long term investment situation; why should this current calamity?
Oh my God!!! Rosemberg is buying anything.
does that mean buffet is looking for some sweet, can’t lose, government backed deal in japan?
Notify me of follow-up comments via e-mail
© 2009 pragcap.com · Register for PC
The ultimate permabear and permabull agree on one thing – Japan is a buy. In an interview over the weekend Warren Buffett told reporters that Japan is a good value and should do well over the long-term. You can see the interview here:
David Rosenberg of Gluskin Sheff agrees. In this morning’s research note he explains the “Japan is cheap” thesis:
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