Not Ready to Jump into Japan

Barron's had an article making a case for owning Japan.

To say Japan has struggled since topping out around 39,000 a couple of decades ago would be an understatement. Throughout this whatever-it-has-been, there have been many people that have made the bull case for Japan, and this has been wrong for most of the last 15 years.

I should point out that there was a nine month run from summer 2005 to spring 2006 when the Nikkei rallied about 45%, which skews the five year comparison versus the S&P 500 in favor of Japan. That nine month rally took the Nikkei to about 17,500. A year and a half later the Nikkei is just above 15,000.

The argument for Japan is always well reasoned and plausible but just never pans out, or perhaps, more correctly, does not stick.

All those years of zero - or close to zero - interest rates and the economy still cannot really get its footing. I don't know the extent to which I could diagnose the problem but there is a problem.

I have never owned Japan nor do I have any plans to own it.

Could now finally be the time to buy in? Of course it could, but I don't think so, and I know it won't be with my clients' money. If Japan really is back, do you need to be the first one in?

The simple decision to avoid an area of the market like this can spare some drag and volatility, but no Japan requires going a little narrower than what a lot of folks do.

click to enlarge