He also says you should only buy something cheaply because there is a catalyst coming which will cause that cheapness to be recognized and properly valued. What is the change which might galvanize the Nikkei? Will it be a devalued dollar, and a flight to quality in Japan? Without a catalyst it's just a dead-cat.
Tea, I think commodity indexing is interesting. Have you looked at some of the index futures offered? What are your thoughts on them? I've looked at them from the point of view of having a portion of them in my portfolio in them since they are negatively correlated to equities. However, when I dig into them I find some problems. First, neither the Goldman Sachs or the AIG products are carried by IB which is my broker. Second, I initially liked the AIG best because the underlying index is rebalanced each year. But because of the months offered on this product, you get into some weird spread situations that have to be hedged out on some months. For instance you might need to put a spread on in gold while holding the February contract to cancel out an implied spread in your position. This cannot be done for someone like me who only would have a handful of contracts. Plus a lot of the hedges would have to be done on products that are pit traded. All of this makes this a giant hassle which flies in the face of indexing. As far as a trading vehicle, it looks like there are tradeable trends in them, but neither of those 2 products seem liquid enough to me. I would love to get involved with some sort of commodity index, but nothing seems to be worthwhile. I know Jim Rodgers runs an index fund. Do you know much about it? Shreddog
To be honest, I have not looked into commodity indexes for trading yet. Just bouncing ideas around. If a liquid electronic one does not exist yet, perhaps Eurex could come up with one.
Honestly, I was selling bukku puts on the Nikkei while it was bottoming several months ago and did ok. Unfortunately didn't participate in the rally ... woulda shoulda coulda, as they say. But I give Rogers credit for catching the ride after being Bearish for over a decade - he played it perfectly. Yes I agree, it looks like a dead cat, now. The first bounce always does. His argument is that Japan has finally come to terms with the hubris of their own bubble and appear to finally be making real effort at reform. I'm not entirely convinced. The real catalyst for Rogers came when he was in Japan and saw that everyone was extremely pessimistic and dismissive of the prospect for equities or end of deflation. If there was more to his argument I don't recall. Keep in mind, however, that Rogers invests on a mult-year timeframe. His general philosophy is that if everything is going bad, eventually something will go right, so it is adviseable to buy value when everything is going wrong, for lack of a better word. I'm still in the dead-cat bounce camp for Four reasons: 1. The Banks still have problems. 2. If commodities and oil are entering a bull trend, this is quite negative for a commodity dependent economy like Japan. 3. Japan's aging population will increasingly suppress prospects for economic growth. 4. At some point in the not-to-distant future, I believe the world will have to confront N. Korea. Japan and N. Korea have become increasingly hostile re: spying, drug smuggling, and kidnapping on the part of N. Korea. Thus, at the moment if I were to buy N. Asia I would look to S. Korea, or even Taiwan or Hong Kong. They have younger populations and better growth prospects, IMO, than Japan. I'm hugely bullish on Greater China anyway.
For the small trader the future will be in access to international markets with platforms like IB or Refco that let one move his money all over the world quickly. Case in point is today. Look at all the saps beating their brains in with ES for peanuts when they could have participated in what, a 60+ point swing in DAX this morning or perhaps a huge rebound in Japan tonight. More and more indexes and ETFs will be avlb. to all. I'll be able to trade GE in Frankfurt, NYC or Osaka or somewhere else in the world when the time suits me. It's the opportunity to go where the money, or the volatility or whatever it is you trade is happening. The best days for small traders are ahead... . Geo. Ok def there's an IB plug. Now get me into Singapore and India.
Believe it or not Michael Milken is actually a consultant to many Japanese banks and is actually helping them create financing deals and selling junk debt. Although Milken was barred from the financial industry in the US, he is not barred from doing business overseas. Perhaps Mr. Milken knows something about Japan that we don't.
The 3 Cs - Currencies, China, and Commodities. I think Asian stock and property markets are also going to be excellent performers over the next 10 years.
Remember there's always something to worry about at the end of a secular bear market. If there wasn't, the price would be far higher. Think of US stocks in the early 80s, there were plenty of fears then (communism, nuclear war, dollar strength, the budget deficit etc). Remember oil soared in the 70s, but Japan experienced a huge economic boom. IMO you are trying to overanalyse the situation. All that really matters is that Japan has had a 13 year bear market, sentiment is at maximum pessimism with no interest in equities, and yet the market price is behaving as if it were in a major bull market. Personally I wouldn't be surprised if the Nikkei hit 20,000 within the next 3 years. However, I do agree with you that there are other markets that have better potential. I like Thai equities, and also certain sectors of China, for this reason. Finally, I think a major potential wealth opportunity lies in purchasing Chinese real estate. IMO central Shanghai property will eventually be worth more than that in NYC or London. Currently it is selling for about 10-20% of prices in the West or Hong Kong. As mentioned, the chance of China having a huge bull run and eventual mania bubble, similar to Japan in the 1980s, is quite high. And with a population of 1 billion who save like mad, it has the potential to literally be the biggest bubble in the history of the world.