About this Blog
"Land of the rising sum" or "Land of the setting sun" are just two of numerous dysphemisms in the mainstream media describing Japan's current state of economic affairs and looming economic disaster.
Mainstream economists now forecast that Japan’s decline from economic predominance will mirror that of Argentina over the 20th century. Such gloomy prognostications should whet the appetite of any "true" deep value investor.
Granted, Japan's macroeconomic picture isn't looking very rosy at first glance.
20 years of stagnation and a stubborn, albeit mild, deflation. Gross debt/ Gdp one of the highest in the world, standing around 200%. A shrinking workforce due to a rapidly ageing society: A high yen, making it harder for large Japanese exporters to compete on the world markets. And, last but not least, the challenges resulting from the triple disaster of 11/3 are just a few of numerous headwinds the Japanese economy is facing.
But wait! Can't we see Japan's economic situation from a different perspective?
Are 20+ Years of stagnation a too high price for one of the greatest boom/ bust cycles the world has ever seen?
Isn't it true that Japan's lasting stagnation/ recession is just a cleansing mechanism, that gets rid of malinvestment, overcapacity and overleverage in the economy? Why should a mild deflation be avoided at all cost, while a mild inflation is aspired for by the mainstream economists and central bankers? Might it be that a country as whole could be better off in a mildly deflationary environment? Isn't Japan also the largest creditor nation in the world? Does Japan's debt situation really look that gloomy on a net basis, e.g. when one adds back cross holdings of debt at Japanese institutions, Japan's domestic and foreign assets and Japan's huge dollar reserves? Has a high yen only adverse effects on a resource poor economy such as Japan? And couldn't the rebuilding effort after the devastating triple disaster give the Japanese economy a short term boost?
And most importantly, what is going on at the microsphere of the Japanese economy, e.g. individual companies. Isn't the gloom and doom already fully priced in into Japanese stocks? Is the steep corporate governance discount in Japan justified, or is corporate japan gradually shifting towards a more shareholder friendly attitude?
In short, could it be that Japan's stock market represents a once in a lifetime investment opportunity for the hard-nosed contrarian value investors?
I personally think so and my research and investments at this point of time are focused exclusively on Japan's economy, corporate action in Japan and undervalued Japanese stocks. Many Japanese stocks qualify for the save and cheap criteria outlined by the great work of Benjamin Graham; the father of value investing. The same cannot be said of the U.S and Europe. Basically, if your investment strategy truly was focused on the concept of "Margin of Safety" your portfolio might entirely consist of Japanese companies and this blog might be of interest to you.
The focal points of this blog:
First and foremost, presenting the concept of value investing first outlined by Benjamin Graham and Graham L. Dodd.
Secondly, scrutinizing the prevailing opinion about Japan's looming economic disaster, as well as the status quo of corporate behavior in Japan towards the true owners of a publicly traded company, the shareholders.
And, last but not least, applying Benjamin Graham’s concept of intelligent investing to individual Japanese companies.