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Hi Bill,
Friday, February 20, 2004, 1:38:37 PM, you wrote:
w> Yuki:
w>
w> The following is from a trader in Singapore. Any comments?
w>
w> Bill
w>
w> Very briefly, after many years of purging and
w> consolidation JAPAN has the leanest and meanest mid cap and small
w> cap companies ; some have cash exceeding NAV and business
w> models that will be produce big cap status stocks
w> within a few short years. Going by valuations as we know it in
w> past cycles will cause many missed opportunities in whatever
w> marketplace. Would suggest one to track the TOPIX Sectors not
w> NIKKEI per see.
w> No other country in the Global firmament satisfies such
w> criteria for sustainable growth.
w>
w> Now is the time to take on a Yen Carry Trade to buy Japanese
w> stocks, when most, [probably all, of the laddies have unwound
w> their decimated positions taken on when it was then very
w> fashionable. Bankers will say "you must be mad to do this. So many
w> have perished doing this over the years" Precisely why it is
w> timely to do so now.
I would say that there is probably some truth to what is being said,
but I would caution that it is quite optimistic, and there are a lot
of possible flies in the ointment.
First, it is true that some companies have become lean and mean. But
others refuse to change. The recent Kanebo situation is a prime
example of how the system still tries to protect the weak, instead of
letting Darwin take over. Kanebo, the second-largest cosmetics maker
here, was set to be taken over by Kao, the biggest "soaper" in Japan.
Kao has good inroads into China, and the deal would have been great
for both companies. But at the last second, in steps the Industrial
Revitalization Corporation of Japan (IRCJ). They decide to give
Kanebo a *huge* taxpayer bailout, so that it can remain independent.
Lots of cheap, lousy excuses were given for this. One unstated but
genuine reason is that the IRCJ has been sniffing around for a "name
brand" rescue operation so that it could justify its own existence.
Now they have one. Hooray for everyone but the taxpayer (hooray for
the banks who have loaned this company too much money).
The other thing to remember is that the official business policy
here, as much and probably more than reform and restructuring, is to
try and keep the dollar from falling too far against the yen. This
also lets companies escape economic realities. But, the escape may
be just temporary. Who knows if Japan can prop up the dollar long
given the really scary list of problems with the US fiscal position.
And Japan spent almost EIGHTY BILLION DOLLARS in January of this year
ALONE trying to defend the dollar. How long can this go on?
On the plus side, Japan is exporting to China like crazy (and
importing really cheap stuff that is fueling our own deflation).
Japanese steel is flooding the market over there. This does make the
dollar connection a bit less important, and there's talk that the
Chinese currency will be revalued (up) later this year, which Japan
would love.
I think the focus on mid- and small-caps is the way to go. But I
wish I could see more with business models that will make them big
cap stocks in the future. But then, that is not the type of trading
that I do.
If the 21st century is to be the century of China, economically,
Japan is extremely well positioned to gain advantage from this. But
the devil, as usual, is in the details.
I want to know why this fellow didn't make this call 10 months ago.
He would look like a genius right now. He may still, but it's not
going to be nearly as easy from here forward, I suspect.
Yuki
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