Lance

Bespoke's Country Snapshot (5/6/08)

Japan in a "perpetual downtrend"? I guess perpetual would be since the end of last July, then. Prior to the end of last July, Japan spent nearly a year in an uptrend coming off the mid-year '06 worldwide equity snap-correction. Prior to that '06 correction, Japan had risen about 40 percent in the previous 12 months. So, no, hardly "perpetual" at all. While Japan has certainly lagged in some time frames (like the past 18 years as a time frame), it has not been, particularly recently, a perpetual laggard. It just seems that way to some people, especially to those who don't time the market very well.

A Few Reasons to Buy Yen

Maybe.

But you should know that the Japanese *always* repatriate cash leading up to year-end book closings (March 31). So that means very little at present.

Moreover, the BoJ is unlikely to raise interest rates anytime soon. A bit of inflation is actually *welcome* here -- somewhat of a relief -- after prolonged deflation. Politically, with a weakening job market and stagnant salaries, raising rates here right now is a non-starter. And remember, the BoJ Governor is a third-pick political compromise, hardly anyone to show a streak of independence when it comes to monetary policy. Also, "round two" inflation (higher salaries demanded by unions to keep pace with higher prices) is much less likely here now than in the Euro zone or America. A rate hike here before the Fed? I'll give you at least 3-2 odds that does not happen.

My bet is that the yen-dollar cross goes almost nowhere for the next year or longer. Maybe 4 or 5 percent up and down but not getting any real directional traction either way. The people who were calling for 80 six weeks ago have lost their bet, which was really a bet on a complete American economic collapse. Didn't happen, and looks less likely day by day.

Market Outlook: Watch Out, the Signs Can Be Deceiving

dink: it wasn't a metaphor; it was a simile

If Not Now, When Mr. Bernanke?

If the Fed has to react to every market correction, then something is wrong with the market. If the market is going to "crash" unless the Fed acts, then something was already wrong with the market.

Maybe they want to do something. But maybe they want to do something at a time when the market isn't going to drive over them like cheap roadkill 5 minutes after they do it. You get more bang for your buck by picking your shots carefully. It's also very doubtful that the situation is that dire, except perhaps to people who thought S&P 1550 five years into a bull market was a good place to hop on board.

I'd like to see this panic extended a few days so I can buy some values. I don't need a 5 percent Fed-induced burp that will fade like last summer's suntan, thanks.

Aiful Corpration to Benefit From Japanese Consumer Lending Consolidation

Let the record show that this moron never responded to any comment posted here, and more importantly, his "average-down buy" (yeah, even "pro" posters can be stupid) is now down about, oh gee, another 50 percent from his average-down entry price.

Buy more here? ^_-

God, I want to get notified so I can take the other side of some of these trades.

Nikko Cordial: Southeastern Asset Management Offers to Sell for 1900 Yen

Oh, and let me add, I was plenty happy to give Chuck my shares last spring at 1700.

Who pays these fools?

Nikko Cordial: Southeastern Asset Management Offers to Sell for 1900 Yen

As of today, January 11, 2008, Nomura is trading at a discount to the Citi-bid-supported Nikko.

Chuck Prince was/is a moron. I rest my case.

Why I'm Not 100% Convinced That We've Entered A Bear Market

First, even if we are in a bear market, they are notoriously difficult to play. Slow slides followed by short covering rallies that will make your head swim.

I think you've made some good points, and considered this from several angles. The way I would play this if I was in US equities is pretty straightforward. I'd be oscillating between zero and about 50 percent long, as apparent buying opportunities presented themselves. I would hold the other 50 percent in reserve for the 25 to 35 percent pullback, which may never come, but which is much more likely under the current circumstances than it was before. I think if you go 100 percent long here, at any point near term, you risk getting trapped.

I agree, there is no bubble waiting to be popped. The downside is very, very unlikely to be 50 percent, or 70 percent. But the downside is certainly 20 to 30 percent possibly. Thirty percent off S&P 500 at 1500 is way, way down there at about 1,050. Even 20 percent puts it at about 1200. Anybody willing to have 100 percent get trapped like that? Anybody think it can't happen?

Try 120-dollar oil for starters. Try and imagine what earnings might be like in the next two "earnings seasons".

P/Es are reasonable? Sure, but not cheap. I go back to when they have slumped to 12, or even 10. It happens.

The game is rigged to the upside, and anyone who doesn't realize that is not too clever. But from time to time there is substantial downside risk. This next 6 to 12 months is one of those times, I think. Keep an oar in the water if you must, but don't get sucked in. There are times, not often, but I think this is one of them, that call for more substantial cash reserves than normal. I want to buy at 1100 or 1200. It will take cash. I will have some.

Aiful Corpration to Benefit From Japanese Consumer Lending Consolidation

So ... you make a tout ... you get your behind handed to you on a silver platter ... people ask for clarification about your tout ... and you are too weak to even reply.

You don't belong here. Got that? Anybody can recommend anything. People with guts stand behind their recommendations, or at least offer explanations.

You ran away and hid. Pitty the bastards that listened to you.

Lance

Aiful Corpration to Benefit From Japanese Consumer Lending Consolidation

I am NOT going to let this go away. Not because you were wrong, but because you refuse to say anything about it.

Either you respond to your mistakes, or you don't deserve to be a featured poster ... anywhere.

What say you? Silence when your picks go down the toilet?

How professional.

Are you going to wait for 2012 and then claim victory? Your position is FAR underwater; much more than prudent money management would allow.

What say you, wimp?

Lance

Aiful Corpration to Benefit From Japanese Consumer Lending Consolidation

Not to beat a dead horse here, but do you follow up on any of these train wrecks?

This tout is now about 50 percent of your entry price (as of yesterday). I didn't buy it, which is probably obvious from my previous comments. Moreover, given the industry meltdown, I didn't enter around 2200 either. There simply is no way to manage a trade with reasonable risk when these companies are just pancaking.

But you put it out there, and you should follow up on your trades.

Lance

Aiful Corpration to Benefit From Japanese Consumer Lending Consolidation

That didn't take long.

Aiful traded at 2,500 today, August 15.

Aiful Corpration to Benefit From Japanese Consumer Lending Consolidation

The stock is probably not going to turn you into a "jumper", but I'd like it a lot more at about 2500 yen, maybe 2200.

Your numbers are old, however. The 1.82 yield you quoted is based on the last dividend of 60 yen per year. But Aiful is only projecting 40 yen this year, so the yield is only about 1.22 percent, which means you really aren't getting much more return for assuming more risk than companies with fewer headaches may give you.

This is bottom-picking for sure, and of course everyone wants to buy bottoms. But these companies have not only taken huge financial hits (about five years of earnings to the red last year in the case of Aiful, and this was what they were earning when they basically had a license to print money), they have become pretty much social lepers.

You are saying Aiful will survive, and I tend to agree with you. But the road back to prosperity is likely to be a long one, and these consumer lenders are notorious for stock volatility. I want to see complete capitulation before I step into this mess, and I haven't seen that yet. Moreover, I'm not sure there are any consumer finance cherries out there to be picked by the survivors.

Aiful says they'll earn about 270 yen per share this year. On July 24 they'll give us the April-June numbers. I wouldn't be at all surprised if they lower the forecast, and the shares take another drubbing. Somewhere there is a bottom of course. But I'm want to buy from someone who bought this 7 or 8 month "bottoming pattern", and then gets exhausted by a 25 percent drawdown from here. Otherwise, I can wait for good news and buy on the way up.

The Takefuji play here is much more reasonable I think; at least you are getting some serious yield for your risk. If you are in for a long ride and can stand drawdown, you're probably only out opportunity cost.

Big Mac Index Supports Japanese Bullishness

I keep hearing this drumbeat ... Japan has underperformed ... Japan has underperformed.

On June 1, 2005, the Nikkei 225 closed at about 11,350. On June 1 two years later it closed at 17,958. In case anyone is math challenged, that's a gain of about FIFTY-EIGHT PERCENT in two years. Mean reversion, you say???

Sure, most of the gain came in late 2005. So what? That kind of performance cannot continue forever. This is a market that has more than doubled since the spring of 2003. Yes, it was a depressed low, yada, yada, yada.

Moreover, Japan is now trading at better than 20x earnings by most estimates. Can it go higher? Sure. Can stocks in a mature economy with a potential growth rate of around 2 percent and a declining, aging population also go lower from here? You better believe it. Japanese stocks are presently priced for a continuation of good news. Anyone getting real greedy here may manage 10 percent before the end of the year, or may get a 10 percent haircut.

In case anyone hasn't noticed, this place is not exactly shareholder heaven. The cash yield is barely 1 percent, and managers will use equity warrants like artillery to keep it there.

A POSSIBLE currency play exists with EWJ and dollars, but there is absolutely no guarantee that the yen must rise appreciably from here against the dollar, an no guarantee that it won't be 130 by next year either.

I converted my first US dollars to Japanese yen in the winter of 1992-1993. I still remember getting 121 yen to the buck. Sure, the exchange rate has seen some wild gyrations since then, but look where we are today. Machinery orders were an upside surprise today; the market was up about six-tenths; virtually everyone is pricing in a BoJ rate hike next month. The yen sank nonetheless.

Whenever there is a severe economic disruption, or merely the threat of one, what currency does everyone flock to? The yen?

The BoJ is also likely to be VERY gradual in raising rates, particularly once the sales tax issue re-surfaces after the election. (It's a political IED that nobody wants to get anywhere close to until the election is over.) If commodities keep going higher, the Fed is likely to maintain the rate differential anyway. Then it gets real ugly anyway, as it is bound to get sooner or later.

Like I said, this place (Tokyo) is priced for only good outcomes, with few or no bumps in the road. I'm happy to entertain less risk here at the moment than I was willing to entertain a few years ago.

Nikko Cordial: Southeastern Asset Management Won't Sell at 1700 Yen

What clock would that be? The hedge-fund manager performance-bonus clock? Twenty-nine percent is a far cry from 50 percent.

And they probably won't tender, either, but this is just a noise-making repetition of what they have already said.

Some wag once said that you should never confuse a bull market with brains.

Again, if I was Citi I'd pay the 5 yen per share and walk, and let these fools explain to "their clients" how they fumbled a touchdown on the one-yard-line and then kicked it through the back of the end zone.

Of course Mr. Prince could rescue them, but he also could play it smart and pick up a ton of shares below 1700 simply by pulling the rug out from under these guys who are really overplaying their hands.