Where Do You Invest Your Trading Income? Try Japan

Today’s article will be
a very large departure from the normal format. 
Today’s piece will
give a brief overview of the compelling investment opportunities in Japan. 
While that last line may sound like a Merrill Lynch or Smith Barney commercial,
as traders, we simply cannot ignore investing.  What do you do with your trading
income?  Your IRA’s and pension plans?  Do you put them in some lame mutual
fund?  I hope not.  As traders, you are far better at spotting longer-term ideas
than most of the so-called best on Wall Street.

For some time now I have been mentioning the
merits of investing in Japan.  Today, let me bullet point them for you.  Let
me warn you, some of this analysis involves macro/fundamental research.  Those
opposed to this type of insight should read no further.
(lol)

-  The present recovery in Japan is taking place
in a rather non-traditional manner, fiscal stimulus by the government is
non-existent

-  The present recovery is less reliant on export
growth.  In fact 80% of the export share of GDP growth is to China.  This leaves
Japan less vulnerable to a slow-down in the US

-  Early signs of firming real estate prices as
well as golf club membership prices (that has to be a good sign!)

Source:  Goldman Sachs

^next^

Now that you survived the macro analysis, let’s
take a look at a stock I have been slowly accumulating since the spring of 2003
and have added to a bit more aggressively as of late.  I mentioned the recent
purchases in my column a few weeks ago.  They are the i-Shares
Japan
(EWJ).  Yes, it is not a real sexy stock, but serves as a nice
proxy for the Japanese market. 

FX:

The effects of the above mentioned analysis can
be seen in the price action of the JPY
recently too.  Despite  a solid sell-off in the last two weeks, the
JPY
has rallied hard in the last few sessions. 
Based purely on capital inflows into Japan, it would appear that BoJ
intervention over a period of time will really have little effect in weakening
the JPY.

“In the first reported week
for March, there was a record ¥1032.2 billion weekly equity inflow to
Japan. Year-to-date accumulated weekly data now suggest an annualized net inflow
of around 5.2% of GDP.”

With this type of capital inflow it is hard to
see how in the long-run intervention will really prevent a rise in the
JPY
.  Sure, there will be some nasty bumps along the way, however,
reduce lot size in order to stick to the game plan.  Likely targets are 105 and
95.

As always, feel free to send me your comments and
questions.  Here is looking to a healthy investment account!!!

Dave