Day after day, well-dressed talking heads are paraded on business media and proclaim how cheap Japan is, how Abenomics will work (he promise... if it doesn't we'll have to question everything we believe in), how GDP is backward-looking (so ignore it... and every other economic indicator), and how being long Japanese stocks (of course, hedged back to dollars because you don't want to take the currency risk that Abe is creating) is a "no brainer." The problem with that strategy is... in 2014, the JPY-hedged Japanese stock market investor in the US has not had a daily close in the green year-to-date and is down over 5% for the year... but it gets worse.
Here is CNBC just this morning proclaiming why being long Japanese stocks is the best trade... Fund Managers are the most bullish Japan in nine years...
However...
Since 12/30/2013, the USD investor who is long the Nikkei 225 hedged back to USDs has yet to see a green close and has seen a total return notably worse than even the worst performing US index - small cap stocks...
[9]
The problem is growing... Since the BoJ's big QQE triple-down plan, the USD-based investor in Japanese stocks is back to breakeven...
[10]
And since the GDP print, the USD-based investor in Japanese stocks is down hard...
[11]
Of course, this is all pointless facts as the meme is that Japanese stocks are the no-brainer trade thanks to Abenomics.. besides Japanese Chief Cabinet Secretary Yoshihide Suga explained last night:
- SUGA: STOCK PRICES DOUBLING SHOW POLICIES PERMEATING THROUGH
Which must mean Venezuela's policies are proving massively supportive for their ecoonomy?
[12]
Simply put - the nominal value of all these indices may be rising but the currency is devaluing at a more rapid pace. As Kyle Bass previously warned, beware the 'nominal' stock market cheerleaders...
Kyle Bass provided a few minutes of sanity this morning in an interview with CNBC's Gary Kaminsky. Bass starts by reflecting on the ongoing (and escalating) money-printing (or balance sheet expansion as we noted here [13]) as the driver of stock movements currently and would not be surprised to see them move higher still (given the ongoing printing expected). However, he caveats that nominally bullish statement with a critical point, "Zimbabwe's stock market was the best performer this decade - but your entire portfolio now buys you 3 eggs" as purchasing power is crushed. Investors, he says, are "too focused on nominal prices" as the rate of growth of the monetary base is destroying true wealth.
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So apart from the fact that Japanese stocks for a US investor have been a terrible investment this year even with all the efforts of the BoJ and Abe... fund managers are exuberantly bullish still...?
