Are Japanese equities the Trade of the Decade?

Our friends at the Daily Reckoning scored a huge hit in the 2,000s by tipping gold as their ‘Trade of the Decade’. Now the world’s highest circulation e-newsletter, with over a million subscribers, says Japanese equities will be the surprise star asset class of this decade.

ArabianMoney feels pipped at the post. Our friends at the Ritz-Carlton can confirm that we have already booked a visit to Japan for April 16-23. But the opportunity in Japan is not going to go away anytime soon, and Mr. Bonner and his crew might still be a little early to this party.

Golden call

After all the same Merryn Somerset Webb who recently congratulated Mr. Bonner on his golden call in the Financial Times, and is also the reputed editor-in-chief of his MoneyWeek subsidiary in London, has been regularly tipping Japanese equities since she first started working for SBC Warburg in Tokyo in 1993.

Almost two decades later perhaps the time has finally come to invest in Japan. Gold also had a 20 year bear market from 1980-2000, Japan from 1990-2010 is a neat parallel.

Indeed, Mr Bonner is in good company. Dr. Marc Faber noted in one of his year-end prognostications on financial TV that Japanese equities, particularly the banks, are the ultimate contrarian bet today, so low have valuations plunged. But he did not go so far as to recommend buying them.

Perhaps you are not catching a falling knife in the case of Japanese equities – as you would have been doing in 1993 and would be dead by now – but picking up a knife that is sticking into the floor.

But would it be wise to rush out and buy a Japanese equities ETF right now? The great thing about picking the ‘Trade of the Decade’ is that you can be wrong for quite a long time, even years, just so long as it comes right by 2020.

Kamikaze economy

Japan could still get worse before it gets better. The public sector debt is out of control. The competition from China is overwhelming and devastating. Japanese cost bases are still too high. The banks have huge bad debts. Property is still very expensive. The new government is a suicidal. The demographics of an ageing population are frightening.

Some economists see the yen devaluing sharply and hyperinflation ahead for Japan. Holding equities in this sort of environment could be very scary, and you would want to be sure to buy at the right time. Is now that time? It could be the darkest hour.

Well, I suppose the only thing to do is to go to Japan and see for yourself. ArabianMoney has already found out that traveling to Japan is nothing like as expensive as it used to be, and is looking forward to the cherry blossom in the spring.