No6's Financial Markets Thread

[jerpy]

Well here we are again, markets still rising! If ever there has been period to trade what you see and not what you fear, it has to be the last few months.

 

Truly a good run for longs and letting the trend be your friend. As for Bears, they must be hurting now? Keep checking the SUK2 which is my favourite down hedge and just pleased I closed out for now.

[No6]

Well here we are again, markets still rising! If ever there has been period to trade what you see and not what you fear, it has to be the last few months.

 

Truly a good run for longs and letting the trend be your friend. As for Bears, they must be hurting now? Keep checking the SUK2 which is my favourite down hedge and just pleased I closed out for now.

 

I suppose the question is how much further can it go without a pullback to take some of the steam out of the run? At the moment, the FTSE seems to be taking baby steps upwards with hardly any pullback, the run looks stretched. FTSE has ignored the bad news this morning on the domestic economy and is essentially up because the US is expected to open up. Still, we are almost through October without, yet again, the crash, bang, wallop that the bears were expecting. How many months now have they been calling for it? Hindenbergs, head and shoulders, Elliot wave 5's, etc, they have all come and gone, but I suppose a bit like waiting for a bus the bears will be hoping that 3 come along at once soon. I still think if the markets are going to get the jitters it is more likely to be next year than this as fears of double dip or not will be more clear then.

 

I made an attemp at a prediction for the UK markets some time ago, first post on this thread and so far it has for the most part been reasonably accurate.

 

http://www.greenenergyinvestors.com/index....t=0&start=0

[No6]

Dow to test the April high today?

 

Dow Jones Industrial Average

 

The Dow is again testing its April high of 11200. Narrow consolidation below resistance favors a breakout. Twiggs Money Flow (21-day) oscillating above the zero line suggests buying pressure; respect of the rising trendline would confirm. Upward breakout would signal a primary advance to 12700*.

 

====================

 

S&P 500

 

The S&P 500 respected short-term support at 1170, confirming the advance to the April high of 1220. A strong rise on Twiggs Money Flow (13-week) signals buying pressure. Breakout above 1220 would offer a long-term target of 1420*.

 

====================

 

Transport

 

The Dow Transport index and bellwether stocks Fedex and UPS all continue in primary up-trends — a bullish sign for the broader economy.

 

http://www.incrediblecharts.com/tradingdia...-25_markets.php

[No6]

Is this an answer to some of the problems that retailers will be facing if there is a consumer downturn?

 

New HMV store 'pops up' at St Stephen's – just for Christmas

 

THE so-called 'pop-up' store phenomenon has reached Hull, with HMV opening a temporary store in the city.

 

The music retail giant opened its doors yesterday at the former Adams unit in St Stephen's Shopping Centre in Ferensway, Hull city centre.

 

Setting up the store means HMV can take advantage of the Christmas customer surge before closing again in the new year.

 

While there have been low-budget Christmas shops opening temporarily, this is the first high street name to use these retail "guerrilla" tactics in the city.

 

Gennaro Castaldo, HMV's head of press, said: "We have opened a short-lease trading store, which isn't permanent at this stage.

 

"Pop-up stores are a relatively new concept and we have been the first to roll them out on a large scale.

 

"We have already been successful at opening short-term stores as there is such a high demand at Christmas.

 

"Last year we opened ten pop-up stores and five became permanent.

 

"It will be a fairly basic store focusing on our main chart music, games and films."

 

http://www.thisishullandeastriding.co.uk/n...il/article.html

[drbubb]

I made an attemp at a prediction for the UK markets some time ago, first post on this thread and so far it has for the most part been reasonably accurate.

http://www.greenenergyinvestors.com/index....t=0&start=0

 

EXCERPT:

May/June are the most likely months for the UK General Election and I would expect a few things to happen in the lead up. First, Brown and Darling are not likely to do anything in the next six months that hurts their chances of being re-elected, the process of buying votes will continue into the new year. Second, as we get closer to the election and if the polls are close I would expect the markets to get pre-election jitters. Do not be surprised if "sell in May" has more meaning this year than in the recent past.

 

After the election, the market will probably go up or down depending on whether they like, or not, the new Government's plan to cutback public spending and the winding down of QE that will probably happen soon after. I would expect a Tory Government to do more on cutbacks or at least do it over a shorter time period going forward. I don't think the market really care who wins, although they would probably prefer a Tory victory, but a hung parliament would probably knock 5-10% off the FTSE fairly quickly. Lack of direction going forward would make the last six months of the year difficult for the UK market.

 

Other than that, right now I agree with much of Nadeem Walayat's analysis posted below, as I think the stage has been set for higher inflation as measured by the CPI going forward, but not hyperinflation. I would not be surprised to see a 5%+ inflation at some stage and a new Government would be expected to respond to this.

 

As for the UK housing market, the recovery will remain a fiction as the number of sales will likely remain low for as long as the banks stay away from offering fast track or self-cert mortgages to anyone with a pulse. Sales may go up a few thousand on average every month and that may be enough to satisfy the markets, but they cannot return to 2007 levels of borrowing.

 

If everything goes to plan I could see the FTSE hitting 6000 by year end

 

Yes, that's a Good-looking Call.

 

FTSE ... update

 

Do you still expect it to hold up into year end?

[jerpy]

If everything goes to plan I could see the FTSE hitting 6000 by year end[/i]

 

Yes, that's a Good-looking Call.

 

Reading all the comments No6 posted up on that thread, it would suggest who needs to pay attention to fund managers and professional market commentators. No6's yearly view seems as accurate as any of them at this point in time.

[No6]

EXCERPT:

May/June are the most likely months for the UK General Election and I would expect a few things to happen in the lead up. First, Brown and Darling are not likely to do anything in the next six months that hurts their chances of being re-elected, the process of buying votes will continue into the new year. Second, as we get closer to the election and if the polls are close I would expect the markets to get pre-election jitters. Do not be surprised if "sell in May" has more meaning this year than in the recent past.

 

After the election, the market will probably go up or down depending on whether they like, or not, the new Government's plan to cutback public spending and the winding down of QE that will probably happen soon after. I would expect a Tory Government to do more on cutbacks or at least do it over a shorter time period going forward. I don't think the market really care who wins, although they would probably prefer a Tory victory, but a hung parliament would probably knock 5-10% off the FTSE fairly quickly. Lack of direction going forward would make the last six months of the year difficult for the UK market.

 

Other than that, right now I agree with much of Nadeem Walayat's analysis posted below, as I think the stage has been set for higher inflation as measured by the CPI going forward, but not hyperinflation. I would not be surprised to see a 5%+ inflation at some stage and a new Government would be expected to respond to this.

 

As for the UK housing market, the recovery will remain a fiction as the number of sales will likely remain low for as long as the banks stay away from offering fast track or self-cert mortgages to anyone with a pulse. Sales may go up a few thousand on average every month and that may be enough to satisfy the markets, but they cannot return to 2007 levels of borrowing.

 

If everything goes to plan I could see the FTSE hitting 6000 by year end

 

Yes, that's a Good-looking Call.

 

FTSE ... update

 

Do you still expect it to hold up into year end?

 

I'm still expecting a pullback, perhaps to the 5400-5500 range, there is support at the former figure. Below 5400, then bulls would need to worry. If we had a pullback to the 5500-5600 range then that would probably set up nicely to a move towards 6000 by the end of the year, santa rally time. Given the timeframe of the current upward move, it has looked stretched for the last few weeks and probably needs a pullback to set up the next move up. As always, I think the FTSE will largely follow the US and the current mid-term elections, especially if the Tea Party (or Tea Party backed Republicans) do well, could be bad for the markets expecting a free ride with more QE, if they manage to stop it.

 

Grassroots Tea Party leaders have vowed to hold accountable Congressmen they supported and funded if they stray from the goals of balanced budgets, smaller government and free markets. They expect candidates not be obsessed with re-election and toeing the party line, but with principle.

 

Matt Bennett, a former official in the Bill Clinton White House, thought Tea Partiers in the Senate in particular would relish the chance to use their power to block legislation, judges or political appointees.

 

http://www.telegraph.co.uk/news/worldnews/...Washington.html

[No6]

Reading all the comments No6 posted up on that thread, it would suggest who needs to pay attention to fund managers and professional market commentators. No6's yearly view seems as accurate as any of them at this point in time.

 

Well, if someone in the city wants to offer me a nice job with a six figure salary and nice austerity bonus, I'm open to offers.

[No6]

UK economy grows a faster-than-expected 0.8%.

 

The UK's economy grew at 0.8% between July and September, official figures show, suggesting the economy is recovering faster than expected.

 

It follows 1.2% growth in the second quarter of the year, and is double the 0.4% expected by analysts.

 

The gross domestic product (GDP) figures released by the Office for National Statistics (ONS) is only a first estimate, and may be revised.

 

Analysts had expected a slowdown after weak retail sales and housing data.

 

Government relief

 

"This is the second major GDP growth surprise in a row and suggests that the UK economy is more resilient than many had feared," said James Knightley, economist at ING.

 

http://www.bbc.co.uk/news/business-11624742

[No6]

Interesting thoughts on Keynes and investing from Money Morning newsletter today.

 

We can learn a lot from Keynes

 

So how should you invest? Well, here's something rather ironic. A lot of this money printing and deficit spending by governments is being justified by referring to the economic theories of John Maynard Keynes. His basic idea was that governments should spend when consumers and businesses aren't. It gets the economy over the rough patch and re-ignites the "animal spirits" needed to get people spending and companies investing again.

 

I don't want to get into a big discussion of those theories right now. Suffice to say that Keynes' name has rightly or wrongly been used to justify much of the government intervention that has effectively turned the markets into a giant casino.

 

So what's ironic is that we can learn a lot from Keynes's investment views about how to cope with the market conditions that his economic views have helped create. I've recently been reading Keynes and the Market, by Justyn Walsh. It came out in 2008, and was somewhat overshadowed by the various financial crisis tomes hitting the shelves at the time. But it's a very enjoyable, straightforward account dealing with Keynes' investment skills, rather than his economic views.

 

You may not have realised, but Keynes was a hugely successful investor. You can read more about that on the MoneyWeek website here: The man who inspired Warren Buffett.

 

When Keynes started out, he was a 'momentum trader', as we'd call it today. He'd ride the ups and downs of trends, buying at the bottom and selling at the top. Like many intelligent people, he thought he could beat the market. You just had to be wiser than the common herd - and Keynes knew he was that.

 

As he put it, "so long as the crowd can be relied on to act in a certain way, even if it be misguided, it will be to the advantage of the better-informed professional to act in the same way - a short period ahead."

 

But the trouble with markets is that there's often a huge gap between what you think they "should" do, and what they do in practice. Keynes ended up losing a lot of money speculating on commodities in 1928. The remnants of his portfolio then took a beating in the stock market crash of 1929. That's when he began to realise that "forecasting the psychology of the market" was a lot harder than it looked.

 

How to be a successful value investor

 

So what did he do instead? Simple. He stopped trying to work out what the market would do next. Instead he bought assets that he had worked out were cheap. He reasoned that while the market may not appreciate their value at that moment, it would in time. And he sold them when they became expensive. And he focused on income, rather than capital gains.

 

http://signup.moneymorning.co.uk/mm.php?x=X980K904

[No6]

How cheap is Japan? The trend for Japan still looks down, but some set ups may be suggesting that they cannot get much cheaper. If the Nikkei manages to stay above that last low then finally Japan may be on the road to pulling out of its 20 year slump.

 

The world's cheapest major stock market is… Japan.

 

The price-to-earnings ratio is in blue, and the Nikkei 225 Index is in black.

 

 

http://www.dailywealth.com/

 

[Jake]

How cheap is Japan? The trend for Japan still looks down, but some set ups may be suggesting that they cannot get much cheaper. If the Nikkei manages to stay above that last low then finally Japan may be on the road to pulling out of its 20 year slump.

 

'like buying gold in 2002'

 

I wonder. Gold is up about 400%. Nikkei could go lower than 2008 lows. Was that rock bottom? Or is there a little more pain to come? One more bout of global deleveraging could do it. I am expecting that/have been expecting that. Think I'll leave off till spring '11. Dr Steve's 3 conditions for buying might be even better by then. But...who knows?

 

'If the Nikkei manages to stay above that last low...'

 

[No6]

'like buying gold in 2002'

 

I wonder. Gold is up about 400%. Nikkei could go lower than 2008 lows. Was that rock bottom? Or is there a little more pain to come? One more bout of global deleveraging could do it. I am expecting that/have been expecting that. Think I'll leave off till spring '11. Dr Steve's 3 conditions for buying might be even better by then. But...who knows?

 

'If the Nikkei manages to stay above that last low...'

 

The interesting trendline on the chart is the price-to-earnings ratio line, now in reach of levels seen only 3 times in the last 35 years. If the Nikkei is to go lower then this trendline is likely to reach a new low. This is possible, but sooner or later Japan becomes too cheap. Whether this means the end of the Japanese bear market only time will tell. Right now it is probably right to wait for some confirmation.

[drbubb]

How cheap is Japan? The trend for Japan still looks down, but some set ups may be suggesting that they cannot get much cheaper. If the Nikkei manages to stay above that last low then finally Japan may be on the road to pulling out of its 20 year slump.

Good comment- which I have copied onto my thread comparing China & Japan.

Here are some charts from there:

 

China versus Japan : Opposite or Similar fates ?

 

CHINA / FXI ... update

 

JAPAN / EWJ ... update

 

China-to-Japan / FXI-to-EWJ ... update

 

Ratio doubled since the late 2008 low. As China/FXI more than doubled.

 

[romans holiday]

Interesting thoughts on Keynes and investing from Money Morning newsletter today.

I think Keynes is very relevant to today's economic climate. His notion of money illusion, which the monetarists effectively undid, is crucial to trading and investing today. The other depression economist Fisher focused on money illusion also. Without it, investors/ traders are all out at sea by not bothering to ask what the [increased] numbers represent in reality.

 

In a global economy, you have to ask how profits are to be measured outside a mere nominal increase in the national currency.

[No6]

I think Keynes is very relevant to today's economic climate. His notion of money illusion, which the monetarists effectively undid, is crucial to trading and investing today. The other depression economist Fisher focused on money illusion also. Without it, investors/ traders are all out at sea by not bothering to ask what the [increased] numbers represent in reality.

 

In a global economy, you have to ask how profits are to be measured outside a mere nominal increase in the national currency.

 

I've long held the view that there is a disconnect between investor psychology and the fundamentals of economic theory. One of the big mistakes that economic fundamentalists make is the assumption that what they believe will ultimately be shown to be true. Financial markets are 90% irrational with a touch, about 10% fundamental truth thrown in. Markets and the investors in them can and will justify almost anything and can come up with reams of stats to prove what they want to prove. All you have to do is convince others. Herd behaviour rules. As an example, we use to live in a time when all credit or debt was frowned upon, but now the whole world economy depends on it. It has become more of a norm, perhaps even a financial meme, which to a large degree has become accepted out of necessity. Markets love it, the more money the better, people by and large don't want to be blinded by the theory of it all. The bottom line is that if you really thought about it all and applied some logic to our economic and financial system, the whole thing would likely collapse, because it's farcical, but perhaps no less farcical than Marxist economics, or the idea of a totally free market. The theory is always nice, the reality always distorted.

[No6]

Arm Holdings is a very good UK company, a high flyer that you might think is one for any long term portfolio and you could be right. However, here is an example of a company that currently has lots of irrational good news already built into its share price. Yesterday it produced some cracking results, but despite falling around 9% since then, the P/E is still a hefty 67, falling to 43 next year. I expect the P/E to stay fairly high, but anyone buying needs to be careful right now.

 

When your shares are trading on more than 45 times’ this year’s earnings, a degree of investor nervousness is inevitable. So yesterday’s plunge in ARM Holdings was more a case of the market trying to find reasons to sell and take some profits.

 

ARM investors have had to live with sky-high valuations for years. The company, which does not manufacture but makes its money from licensing deals and royalties on the chips it designs, has ridden the wave of mobile phone expansion and the rise of the smartphone, which takes more of its output. There is no particular reason why investors should not take some profits, but they should also stick in there for developments, says the Times.

 

====================

 

LONDON (SHARECAST) - The continued growth in popularity of mobile devices using ARM Holdings’ intellectual property was largely responsible for a sharp rise in the chip designer’s third quarter profits.

 

Revenue in the third quarter rose 34% to £100.4m from £75.2m in the corresponding period of last year. In dollar terms, revenue rose 29%.

 

Normalised profit before tax rose 60%, or 55% in dollar terms, to £38.8m from £24.3m the year before. “As reported” pre-tax profit jumped from £7.7m to £19.6m.

 

ARM’s operating margin improved to 37.7% in the third quarter from 31.7% a year earlier.

 

http://www.sharecast.com/cgi-bin/sharecast...tory_id=3774110

[romans holiday]

I've long held the view that there is a disconnect between investor psychology and the fundamentals of economic theory. One of the big mistakes that economic fundamentalists make is the assumption that what they believe will ultimately be shown to be true. Financial markets are 90% irrational with a touch, about 10% fundamental truth thrown in. Markets and the investors in them can and will justify almost anything and can come up with reams of stats to prove what they want to prove. All you have to do is convince others. Herd behaviour rules. As an example, we use to live in a time when all credit or debt was frowned upon, but now the whole world economy depends on it. It has become more of a norm, perhaps even a financial meme, which to a large degree has become accepted out of necessity. Markets love it, the more money the better, people by and large don't want to be blinded by the theory of it all. The bottom line is that if you really thought about it all and applied some logic to our economic and financial system, the whole thing would likely collapse, because it's farcical, but perhaps no less farcical than Marxist economics, or the idea of a totally free market. The theory is always nice, the reality always distorted.

How about throwing a third category into the mix... reality?

 

So then alongside psychology/ investor herd behaviour and the rational "fundamentals" [another form of herd behaviour perhaps], you have reality... only dimly perceived, if lucky, by the rational economists.

 

At some point then reality has to bite with the whole farce, of whatever ideology, coming back to earth. I think what surprises most is how long it can keep on going.....

 

I'm convinced that economic reality is to be found on main street in the actions of consumers rather than in the minds of Wall Street type investors. These guys are just being milked for all their worth, scared into very risky markets, by a dying monetarist orthodoxy.

 

In this environment, it may make sense to trade the volatility with a minor position while keeping your major position safe on the sidelines.

[No6]

How about throwing a third category into the mix... reality?

 

So then alongside psychology/ investor herd behaviour and the rational "fundamentals" [another form of herd behaviour perhaps], you have reality... only dimly perceived, if lucky, by the rational economists.

 

At some point then reality has to bite with the whole farce, of whatever ideology, coming back to earth. I think what surprises most is how long it can keep on going.....

 

I'm convinced that economic reality is to be found on main street in the actions of consumers rather than in the minds of Wall Street type investors. These guys are just being milked for all their worth, scared into very risky markets, by a dying monetarist orthodoxy.

 

In this environment, it may make sense to trade the volatility with a minor position while keeping your major position safe on the sidelines.

 

Well, I would say that reality does bite occasionally. It bites when in bull markets things get ahead of themselves and we see a correction, but it also explains perhaps the early to mid stage of a bull market. I don't think that such reality stays as a permanent fixture though and this is why perma bears and uber bulls are usually wrong 99.9% of the time, but there will always be an audience for what they say. You can always make a case to say that any market is over or under valued, but let's face it, the justification is largely made by use of historical averages which are either accepted ot not. If you were to apply reality or logic then lots of things in the financial world look expensive, well they do to me, so I have to suspend this bias in my own thinking because markets think otherwise.

 

I agree with your view of the average Joe or Joanna on main street. The majority of ordinary people live in the real world when it comes to economics most of their lives. This is why for the most part they are screwed or just occasionally have some success and are allowed a few of the scraps off the financial table of life. It's not impossible to get away from this condition, but very difficult to think differently and then take steps to live and invest your time and money differently. Most of the people I know don't have a clue about financial markets, accept the obvious bankers bonuses, city stereotype image.

 

History suggests that things can keep going for a long time, but then often end by blending into something else, sudden shocks are actually quite rare, but who knows, a meterorite might hit the earth tomorrow leaving a horrendous life for those that survive. It's the sort of shock that isn't worth worrying about.

[Van]

Arm Holdings is a very good UK company, a high flyer that you might think is one for any long term portfolio and you could be right. However, here is an example of a company that currently has lots of irrational good news already built into its share price. Yesterday it produced some cracking results, but despite falling around 9% since then, the P/E is still a hefty 67, falling to 43 next year. I expect the P/E to stay fairly high, but anyone buying needs to be careful right now.

 

AAPL is similarly overvalued. It's the current darling of the market, recently overtaking MSFT as the world's largest technology company, and accounts for a whopping 21% of the NDX. A good company, but it's not worth anywhere near its current valuation.

[No6]

AAPL is similarly overvalued. It's the current darling of the market, recently overtaking MSFT as the world's largest technology company, and accounts for a whopping 21% of the NDX. A good company, but it's not worth anywhere near its current valuation.

 

But I suppose this is why the market calls these growth companies. A share price way above real valuation often stays for a long time, eventually it will fall because the company fails to live up to expectations or it meets them and then is considered to be a mature company with lesser growth prospects. Growth companies are often the darlings of the market because that is where quick capital return can be found. It can also wipe you out if you fail to spot when the market decides it is no longer a darling stock.

[No6]

Has Britain become a nation of internet shopkeepers? The web is the place where many a new business may find a home, cheaper to set up and could be the way to go for anyone that wants to start their own business.

 

'Nation of internet shopkeepers' pumps £100bn into the economy

 

The internet is worth £100bn to the British economy, making a larger contribution than transport or utilities, as the country becomes "a nation of digital shopkeepers".

 

The internet accounts for an estimated 7.2 per cent of gross domestic product and this could rise to 15 per cent within five years, according to global research by the respected Boston Consulting Group (BCG).

 

In its report, The Connected Kingdom: How the Internet is Transforming the UK Economy, Britain also emerges as the largest exporter of e-commerce goods in the world.

 

http://www.independent.co.uk/news/business...my-2118518.html

[drbubb]

What do you make of this, No.6?

Cluster And Push (CAP) coming ? (3d may cross below 8d MA)

 

It has been a bit frustrating for the Bears, but a decent size down move may now be at hand.

Something like a "grace box" is now being formed. I will call it a Cluster-And-Push, or CAP set up.

 

Basically prices need to pause within a trend move long enough, to allow the...

...To allow the 8d MA to catch up with the 3d (as prices "cluster").

SEE: ... update

 

What I am expecting is a PUSH down over the next few days where the Push will come with higher than average volume.

That would be a sign that the Trend has Turned.

 

Interestingly, these Turns seem to be occurring around the beginning of a new months. So maybe some portfolio window dressing will get done today and tomorrow, and the Push will be delayed until Monday. But there is no need for a delay.

 

A drop below the 21d MA would be a further confirmation that the new trend is down.

 

Note that: a 3d x 8d crossover on lighter than average volume tends not to be very meaningful,

especially when the 21d MA is not crossed.

== == == == ==

 

Just for your thread, here's the chart for FTSE ... update

 

In the UK, prices have dipped below the 21d. MA, but volumes are still on the light side, and do not yet fully confirm an important breakdown is occurring.

[No6]

What do you make of this, No.6?

 

...To allow the 8d MA to catch up with the 3d (as prices "cluster").

SEE: ... update

 

What I am expecting is a PUSH down over the next few days where the Push will come with higher than average volume.

That would be a sign that the Trend has Turned.

 

Interestingly, these Turns seem to be occurring around the beginning of a new months. So maybe some portfolio window dressing will get done today and tomorrow, and the Push will be delayed until Monday. But there is no need for a delay.

 

A drop below the 21d MA would be a further confirmation that the new trend is down.

 

Note that: a 3d x 8d crossover on lighter than average volume tends not to be very meaningful,

especially when the 21d MA is not crossed.

== == == == ==

 

Just for your thread, here's the chart for FTSE ... update

 

 

In the UK, prices have dipped below the 21d. MA, but volumes are still on the light side, and do not yet fully confirm an important breakdown is occurring.

 

I wouldn't be surprised to see a downward move from here as the current run from September looks stretched. SPY looks like it has a potential support line at around 113, so much will depend on how far a downward move goes. Any sell off on the news is building up nicely to the US elections on 2/11. Tea Party success or a weakening of Obama's position may well result in the markets having the excuse for a sell off. Then we will see if things settle into December for an end of year rally which history tends to support. FTSE will follow the US.

[Van]

'like buying gold in 2002'

 

I wonder. Gold is up about 400%. Nikkei could go lower than 2008 lows. Was that rock bottom? Or is there a little more pain to come? One more bout of global deleveraging could do it. I am expecting that/have been expecting that. Think I'll leave off till spring '11. Dr Steve's 3 conditions for buying might be even better by then. But...who knows?

 

'If the Nikkei manages to stay above that last low...'

 

Maybe this needs it's own thread..

 

I'm going to be putting as much as half of my pension contributions into Japan over next few years. The Nikkei is being crushed by the absurdly strong JPY at the moment. Companies are finding it impossible to make any money in an export driven economy. Who knows how long this will last, but the fundamentals will shift into place eventually as foreign economies import less and produce more goods for themselves, and JPY imports more.

 

I've actually no doubt that the Nikkei will go lower (along with all other markets) as we ebb and flow through the secular bear market that began in 2000 (of which we are maybe 3/4 of the way through). It's a bit like if you bought gold at $240 or $300 or $400 you were still buying in the contrarian "phase 1" of a bull market.

 

One company that I am taking a close look at is Nintendo. Their shareprice is already down 2/3rds. This is a company that has a great history of reinventing itself and coming up with new products that seem to trump the competition. I think they will have a tough year in 2011 as their Wii product enters decline and everyone writes them off and their shareprice could slump a lot more, but that is precisely the time to buy, as I have no doubt at all that they will bounce back with a new line of fantastic products and games that everyone will want. They've been doing it for 40 years since the days of Donkey Kong on Game & Watch, and I would bet a lot of money on them doing it again.