investing in japan

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joe sod

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japan is one of the lowest priced stock markets in the world. It has fallen for the last 20 years, the ageing population and huge government debt and commitments are the reason for all the negativity. Although some analysts like marc faber have been recomending investors buy japanese stocks and banks. any opinions
 
Just because it's fallen for the last 20 years doesn't make it cheap, so I assume you've some other formulas or ratios to back that up. Let us know what they are? I think you're probably right but it needs to be defined.

I'd be interested in the region for the sake of geographical diversification alone...
 
I am a huge fan of Japan as a long term investment. Cheap on a price to book of around 1 times compared to 2-3 elsewhere. Price to earnings around 16, not amazing but always been on a high rating. Peaked at crazy 50-100 times! Been regressing to the mean ever since. Google `japan ugly, unloved, undervalued, underowned`. I emailed Faber recently and he kindly said Japan was back in 'phase zero' as an investment in hìs emerging market lifecycle.
 
what does phase zero mean, but you are saying he now classes japan as emerging market, i was thinking about investing through one of the rabo japan funds. I think it is important to pick the right investment vehicle, last year i invested in natural gas through UNG etf and i got totally screwed because of the way its set up. i didnt do enough research, natural gas went up in price but the eff went down because of contango
 
joe sod said:
what does phase zero mean, but you are saying he now classes japan as emerging market, i was thinking about investing through one of the rabo japan funds.
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Every market goes through a secular (long term) bull market then a secular bear.

Japan emerged in the 60s to 90s and then went through a 20 years of people forgetting about their market. Hence the term emerging or you could say 're-emerging' now applies to Japan in faber's eyes.

Anyone else going overweight in Japan? I certainly am...
 
Every year commentators say this will be Japan's year, and every year the recovery falters. It's in it's THIRD decade of stagnation now....don't see any reason for that to change.

ps Ringledman, did you once post on AAM as Walk2thewater (or something like that?).....just curious!
 
Calico said:
Every year commentators say this will be Japan's year, and every year the recovery falters. It's in it's THIRD decade of stagnation now....don't see any reason for that to change.

ps Ringledman, did you once post on AAM as Walk2thewater (or something like that?).....just curious!
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You seem to be confused between economic growth and stock market returns. If you do some research you will find that there is zero correlation (actually there is a slightly negative correlation) between the two.

As such Japan's economic recovery is irrelevant to the return of their stock market.

The key driver of stock market returns is starting valuation for which Japan is the cheapest global market.

Never posted as anyone else. Why would I. But concerned if many other are into Japan. I dont like to be late to the investment class ;-). Prefer to buy low when the asset is truely hated. I'll let you know once Japan is back up for you to get in ;-)
 
Calico said:
Every year commentators say this will be Japan's year, and every year the recovery falters. It's in it's THIRD decade of stagnation now....don't see any reason for that to change.

ps Ringledman, did you once post on AAM as Walk2thewater (or something like that?).....just curious!
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im in japan through a rabbo direct fund , its doing well

im also in an india fund through rabbo which was thier top bet , its down 15 % since i got in back in january
 
ringledman said:
You seem to be confused between economic growth and stock market returns. If you do some research you will find that there is zero correlation (actually there is a slightly negative correlation) between the two.

As such Japan's economic recovery is irrelevant to the return of their stock market.

The key driver of stock market returns is starting valuation for which Japan is the cheapest global market.

Never posted as anyone else. Why would I. But concerned if many other are into Japan. I dont like to be late to the investment class ;-). Prefer to buy low when the asset is truely hated. I'll let you know once Japan is back up for you to get in ;-)
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Def not confused with economic growth and stock market returns. I'm posting as someone who got burned by the 'buy Japan' argument. Invested early in 2007 when it was REALLY hated. Back then Nikkei was about 18,000....now it's 10,500. Not a good move! Then and since, I've read how Japan is going to come back....and maybe it will. I always thought it would benefit from a China lift. Having said that, the negatives are all there: ageing poplution, crushing public debt, endless deflation, inflexible labour market, unstable government, negative sentiment and general diminushing political and economic power. We shall see, but after my experience, I would advise anyone looking at investing in Japan to proceed with caution.
 
Calico said:
Back then Nikkei was about 18,000....now it's 10,500.
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But you have to also take exchange rates into account, as this has a huge impact in the case of Japanese investments in the last few years:
2007: Nikkei 18000 at EURJPY 160 = 11250
2011: Nikkei 10500 at EURJPY 115 = 9130

Personally I have not yet invested in Japan, but I am looking.
 
Calico said:
Having said that, the negatives are all there: ageing poplution, crushing public debt, endless deflation, inflexible labour market, unstable government, negative sentiment and general diminushing political and economic power.
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....we sadly now have to add the cost of today's huge earthquake and tsunami to that list.
 
I missed that news. that is terrible.

Re investing Japan

Buy and hold....and re balance
I prefer cheap stocks to expensive ones......
I think it is 1/8 of my stockmarket asset allocation
 
i bailed out of japan over the weekend , this story is going from bad to worse , if the nuclear plant goes up , japan will be toxic in more ways than one for a long time
 
The time to buy is when sentiment is awful.

I will be topping up my holdings over the next 6 months.

If you have a 20 year time frame then then recent events will likely prove a good entry point.

Japanese equities were undervalued before and even more so now.

The tragic events will probably eventually prove bad for Japanese bonds and the Yen but for equities possibly not.

I hope things get sorted there soon. Fantastic country and people.
 
This is a common misconception around price and value.

On the morning of Friday 11th march the price of stocks in japan reflected all the information in the Market and expectations of the future prospects of Japanese enterprises.

Then we had some news. A report of a previously unknown event.

This caused the prospects for these companies to be reevaluated and the price fell.
The news continued with reports of explosions in a reactor and prices fell again.

The current prices now reflect exactly the same prospects for Japanese enterprises but simply incorporate additional information which wasn't known on Friday morning. The profitability of Japanese companies has gone down and so prices have fallen simply to maintain the same expected return for an investor for the future.

Equally the expected return on japanese companies is broadly the same as that of usa companies and UK companies given the free movement of capital around the globe.

In order to be indifferent between say microsoft and say Sony investors require a discount on the price of Sony in order to be induced to buy it rather than Microsoft but the expected investment return for both companies is about the same.

Price is different to value which is a combination of two variables price and book value.

Companies trading at a high book to Market ratio are value stocks and have a higher expected return than growth stocks.

But the "value" in the Japanese Market as a whole is the same today as it was on Friday morning. The expected return for an investor today is broadly the same reflecting the impact on the profitability of the market for the future.
 
But market investors don't behave rationally at all times. They act on fear and greed. Stocks can be perceived as ''oversold.'' I remember US stocks went down after September 11 but rocketed soon after. Anyway its always a gamble so be careful out there and only risk what you can afford to and only as part of a diversified set of investments.
 
I was going to post about the wrongs of the EMH but decided not to. Another time...

I hope this situation resolves itself soon, but it's seems to be getting worse by the minute.
 
Not to bother in the interest of balance I'll do it for you

[broken link removed]

wouldn't want anyone missing out on a robust academic and peer reviewed critique of the emh now would we?
 
When you invest in any stock you are making a gamble of some sort. The key is to identify what outcome you are gambling on and why.
If the crisis in Japan is a ''reason'' to invest then the gamble is that it will not be as bad as the fears of other investors who exit Japan. Other investors will also exit Japan based not upon fact but upon rumor and speculation because they have a duty to their investors to maintain a particular risk profile and diversify away from risk. They may also be acting wisely to not have all their eggs in one basket. I suggest anyone who invests in Japan or elsewhere does the same.
In the real world apart away from the stock market the only winners will probably be the construction companys which rebuild the infrastructure of the area. Exporters based in the disaster zone will be out of business, hence making less profits and dependent on any insurance payout.
Stock prices won't stabilise until the full outcome of the tsunami and earthquake/nuclear event are known. With such unknowns hanging over investors it's absurd to talk about ''value based upon fact.''
 
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