Excerpt from Raymond James strategist Jeffrey Saut's latest essay (published Monday, January 10th):
...I also think Toyota’s (TM) CEO is correct about Japan’s Yen needing to trade at 90 to the U.S. dollar. Indeed, in my missive dated December 13, 2010 I wrote:
“If this scenario plays, and stronger economic growth in the U.S. materializes, the various markets should start discounting a normalization of Fed policy. All we need is a few good employment reports and the dollar, as well as interest rates, should rise. Interestingly, if interest rate differentials widen between the rest of the world and the much maligned Japan, Japan’s currency should fall, fostering a surge in Japan’s exports. I have been wrong-footedly bullish on Japan since June of 2009. And while I have not made much money there, I haven’t lost much money either. My investment vehicles have been two small-cap closed-end funds. Those names are Japan Small Capitalization Fund (JOF/$9.20) and WisdomTree SmallCap Dividend Fund (DFJ/$44.28). I continue to like them because Japan is ‘cheap’; and as my father says, ‘Good things tend to happen to cheap stocks.’ Moreover, as the sagacious GaveKal organization opines, ‘A continuation of the bond market meltdown would tell us to own stocks in the U.S., Japan, Korea, and Taiwan’.”
Manifestly, Japan is “cheap” with P/E ratios hovering near 1974 levels. And while I may be wrong about making money in Japanese stocks, I just don’t see how you can lose very much, especially if you adhere to my mantra of not letting ANYTHING go more than 15% - 20% against you.