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If you think American interest rates are headed higher, the best way to play it may be by buying...

If you think American interest rates are headed higher, the best way to play it may be by buying Japanese stocks. Credit Suisse notes higher rates reflect stronger growth, tend to weaken the yen, and won't pressure Japan's underleveraged companies.
Comments (5)
  • Harry Tuttle
    , contributor
    Comments (2221) | Send Message
     
    "If you think American interest rates are headed higher, the best way to play it is..." shorting the US long bond.

     

    Of course, Credit Suisse won't tell you that because they want you to buy stocks, no matter what you think.
    10 Jan 2011, 04:42 PM Reply Like
  • SA Editor Stephen Alpher
    , contributor
    Comments (543) | Send Message
     
    In fairness to CS, the vast majority of their retail clients probably have little interest in shorting bonds, or even buying a bond short etf. I don't necessarily agree with the contention that rates are headed higher or that Japanese stocks will benefit, but I do think it's an interesting idea.
    10 Jan 2011, 05:03 PM Reply Like
  • Harry Tuttle
    , contributor
    Comments (2221) | Send Message
     
    Stephen,

     

    That is exactly my point. Credit Suisse begins every "idea" with a foregone conclusion:"buy some stock." (I suppose under the assumption that "that is what the clients want")

     

    I think what most people want is to make money. However, lets assume that we found ourselves in a world where there is no stock to buy for 12-months. What would CS do? stop recommending stocks or would they find some convoluted story like "higher US rates -> good for Japanese stocks?"

     

    I think their bias is clear and, once you have a bias, your analysis is worthless.
    10 Jan 2011, 05:13 PM Reply Like
  • SA Editor Stephen Alpher
    , contributor
    Comments (543) | Send Message
     
    If I learned anything from the GFC, it's that there's always folks out there looking to invest and there are always stocks to buy. Shorting bonds just isn't a good idea for most. Instead of worrying that the world is going to end if rates tick up, why not look for equities that might benefit.

     

    I'm not concerned with CS and have little use for much sell-side analysis, but to condemn something just because it's sell-side analysis makes no sense. There are plenty of good ideas out there coming from the sell-side, it's the investor's job to pick them out. Be promiscuous in your reading, but selective in your investing!
    10 Jan 2011, 05:41 PM Reply Like
  • Harry Tuttle
    , contributor
    Comments (2221) | Send Message
     
    "...but to condemn something just because it's sell-side analysis makes no sense..."

     

    There are studies that show that you could make money (not much) by selling short all the "buy" recommendations while buying all the "hold" and "sell" recommendations. I believe there is one by UCSD.

     

    So-called "sell-side analysis" is marketing. No different from Apple touting the iPad or Coca-Cola saying soft drinks are good for you.

     

    I do read a few sell-side analysts but their number is statistically insignificant.

     

    Nice talking to you. All the best.
    11 Jan 2011, 09:30 AM Reply Like
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