I don’t see the yen “blowing up”


An excerpt from a post I made in January 2013, and not dissimilar to what I’ve said in times past or believe today. I included some present day comments in brackets.

I don’t see the yen “blowing up” — it’s not as simple as some may wish [initials K.B.] or have been led to believe [initials J.M.] to see a currency like the yen or a country like Japan “blow up” in a straight line. Beware macro pontification coattailing [did I coin a term?]. The great 2005 Nikkei rally saw a roughly 10% weakening of the yen. Overnight [15 Jan 2013], Economy Minister Akira Amari warned excessive yen appreciation (typo: depreciation) may benefit exporters but would hurt people’s livelihoods. The business press is concluding Minister Amari as having suggested the yen has weakened enough. In fact, too weak of a yen begins to hurt exporters if materials costs don’t start to decrease. In this sense, the input environment is quite different than ’05; ditto the strength of the global economy now vs. then. [e.g. crude oil ~$100/bbl these days; Friedman’s The World is Flat was published in 2005]

IIJ: cutting edge Japanese IT company at dial-up prices


Internet Initiative Japan (IIJI) (3774) is being overlooked by the market of late after a run last year to a multi-year high. Poised for a record fiscal year (which ends in a couple weeks), no doubt 2012 – 2013 will prove to be even more impressive. See my write-up, which appears as an exclusive premium article on Seeking Alpha. Also, my just-released book, Investing in Japan, is now available on Amazon. Continue reading

No Stock Market as Undervalued and as Misunderstood as Japan


Japanese stocks have done very well in 2012 and of course the weakening yen has increasingly more to do with the rally; deservedly so for the people of Japan. Otherwise, and unless Japanese stocks continue to do well, they could become neglected once again. Not necessarily a bad thing for value investors, and regardless of the rally to-date, valuations in Japan remain extremely compelling. Allow me to introduce my book, Investing in Japan: No stock market is as undervalued and as misunderstood as Japan, just released this month. Continue reading

Reuters publishes Nader’s entreaty to Cisco, blocks comment

Great to see Ralph Nader write something on the very important matter of dividends and stock buybacks, see, “It’s time for Cisco to cough up shareholder cash.” (Hyperlink visible in full article view) And great to see it published by a mainstream outlet like Reuters. Billions of dollars, if not tens of billions, at companies like Cisco and General Electric for example, are being blown on buybacks while dividends are a much lower priority. Unfortunately, however, Reuters blocked my comment to Mr. Nader’s article. Following is a copy of what I wrote. Continue reading

GE, Gibson Dunn vs. SEC & Me Take II


Serendipitously on Martin Luther King, Jr. Day, I was able to relay great news for shareowners of General Electric (GE) and all publicly-traded companies. The SEC ruled the prior week that GE cannot omit my critical proposal (hyperlink appears in full article view; see page 2 of PDF) requesting its board reexamine dividend policy. GE has since resubmitted dubious arguments to the SEC seeking a reversal of opinion so that it can kill my proposal and ensure the truth of my findings and the merit of my resolution do not appear before us shareowners. Continue reading

Long precious metals, hope others stay long Treasuries


Please see my exclusive article at Seeking Alpha, “Why I’m Long Precious Metals (And Hope Others Will Continue to Buy Treasuries).” I look at some of the perils of investing in Treasuries; the performance of select assets and money growth since 1971 when president Nixon closed the gold window; and discuss my investments in iShares Silver ETF (SLV) and Vanguard’s Precious Metals and Mining fund (VGPMX).

Benjamin Graham’s rediscovered 1946 lectures


Having recently re-read and reviewed Security Analysis (4th ed. pub. 1962), I was pleased to come across Wiley’s web publication of the so-called “Rediscovered Benjamin Graham” lectures from 1946.* Full of nuggets of wisdom these lectures, the tenth and final was particularly gratifying. To each investor or intelligent speculator, his or her own takeaways from Graham & Dodd and said lectures, the latter from which I’d like to call to attention two items in this post (1) index investing and (2) Graham’s parting observations on the conduct of business on Wall Street. Continue reading

Japanese individual investors saying no thank you to JGBs


The Mainichi Shimbun (original in Japanese) reported early Thursday that Japanese Government Bonds’ (JGBs) popularity is rapidly falling among individual investors. Beginning in 2003, the Ministry of Finance (MoF) has sold two types of JGBs (a fixed-rate 5-year and a variable-rate 10-year) four times a year to individual investors. However, as interest rates have been held at zero (remember ZIRP) to near-zero levels for years, Japanese individual investors may finally be voting with their purses. The October 5-year issue had a coupon of 0.6%, the lowest since the program began in ’03, and less than half the peak coupon rate of 1.5% in July ’07.

The MoF now only expects to raise Y1.3 trillion (US$14.3B) this year from individual investors, down from a prior estimate of Y2.4 trillion, and considerably lower than the record Y7.2 trillion raised in ’05. Through the end of this September, individual investors held Y27.7 trillion or 4.6% of JGBs outstanding. The MoF argues that recent individual investor reluctance for JGBs is not an issue because their weighting is so low. However, it goes without saying, as the article accurately points out, that it is an issue, as the government is poised to take on even more debt in the face of declining tax revenues.

In fact, the MoF is reportedly planning to introduce a fixed three-year JGB for individual investors next July. At this time, it’s hard to imagine a warm welcome, let alone a return to previous years’ embracing of JGBs. The MoF may be right in not being very worried, since it can just pressure domestic institutional investors to pick up the slack. So whether individual investors like it or not, it’s probably the case that they will remain proxy buyers of JGBs.

Japan watchers and investors will readily recognize and perhaps even sympathize with the plight of domestic savers. The golden days of the yen carry trade seem so distant with US$1/Y90-level support so sticky. It’s a real shame that Japanese companies don’t pay quarterly dividends as is common practice in the U.S., for instance, since household, quality Japanese companies are in some cases paying dividends at multiples of what JGBs offer. The desperate search for yield could be called off. Instead of chasing the latest overseas investment fad or making risky leveraged forex trades, maybe something more productive could be achieved.

Disclosure: The author has no direct exposure to JGBs, and does not believe a crisis is looming for Japan despite David Einhorn’s position, and in spite of the serious problems the country faces but continues to bundle into a bumbling status-quo. 

Knuckleheaded Nomura


The latest and largest equity dilution — approx. $5.6B; 30% s/o — by Nomura (JP: 8604) [[NMR]] has sent its shares down 16% to ¥573 in Tokyo ($6.35 at ¥90.3/$1) following an earlier rout in NY.  I think the stock has further to fall, given that it was saved by its daily loss-limit (‘limit-down’) in Tokyo with volume of only 8.9 million shares. Volume thus far in September has ranged from a low of 17M shares traded to start the month, to a high of 65M last Friday.

At this point, the $5.6B it plans to raise over the next month would have been more than enough to have just acquired Lehman USA last year! Now the company and its shareholders face the challenge and risk of having to use the capital to expand existing U.S. operations and somehow grow some new business. Doing these things (profitably) has never been easy for Nomura, though it’s always been a dream of sorts.

Meantime, the stock is massively diluted, and unattractive at current levels due to the uncertainty of how effectively it will deploy the capital — it’s about 40% above its March low. While I agree with Goldman’s take that the capital raising is offensive, rather than defensive, in nature, I think it’s a little much. The Japanese business press does too, apparently, dubbing Nomura and the broader market’s sell-off the “Nomura shock.”

Nomura NMR 1-year chart 09-24-09

– No position in any companies mentioned.