Blogs & Comment

Update on Japanese stocks

Since buying into Japanese stocks on March 15 (as described in Japan: a time for brave investors), there has been additional confirmation thatit was the right thing to do. On March 21, Reuters quoted Warren Buffett as saying the calamity was the kind of extraordinary event that creates a buying opportunity.
What Buffett said about Japan
“Frequently, something out of the blue like this, an extraordinary event, really creates a buying opportunity. I have seen that happen in the United States, I have seen that happen around the world. I don’t think Japan will be an exception.
Several other anlysts have expressed similar views
A few days after Buffett, Gluskin Sheff strategist David Rosenberg wrote:
Looking for value? Try Japanese stocks. 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.
On Japan’s debt load, Rosenberg adds:
“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 countrys own residents.”
As for appreciation in the yen choking the economy,he notes:
It looks as though the $25 billion coordinated FX intervention effort has been successful in arresting the strength in the yen And keep in mind that Japans fiscal year-end is March 31st, historically a period when companies often bring money home, so once we get through the seasonal effects, it would seem as though the yen will continue on its new weakening trend ? a much-needed development to offset the deflationary effects from the nuclear tragedy.
What’s next?
Im still looking to implement the second stage of the plan, which is to add to the position if there is another sell-off. But so far, theClaymore Japan (Currency-Hedged) Fundamental Index ETF ( CJP)remains 8% to 10%above the entry point. Im beginning to wonder if I should complete the second step at current levels.