Nikkei to 15,000 points? Try 50,000!
Many would scoff at the notion of the Nikkei 225 index hitting 50,000 points.
And they would be wrong. Dead wrong.
I will, however, sympathize with the contrarians: 50,000 points is, after all, a 242% increase against the current valuation of the Nikkei, an astonishing number given the fact that while we Americans have seen a tremendous pull in the Dow Jones, this has only amounted to a 21% rise since November’s bottom trading range. Yet when we look out to the east to an equities sector that has left all others in the dust, we only hear reasons why this leg up will crash to a screeching halt.
Why do so many people hate the Japanese bull market? According to popular sentiment and referenced in
invest.yourdictionary.com, a bull market is quantifiably defined as a sector moving up by 20%, although this threshold can vary. In either case, the Nikkei 225 has rocketed to nearly 72% off of its October 2012 lows, easily the best performing stock market of the world so far (according to Forbes online). Even Japanese penny stocks, such as Toshiba (ticker symbol TOSBF) have made phenomenal gains off of FOREX speculation and central bank policies.
Still, the criticisms ring loud: this can’t last! The Japanese are playing kamikaze with their currency! It’s the end of the world! Ah-woo-gah! Ah-woo-gah!
If you want to protect your wealth and position yourself for phenomenal gains, there is no better asset class than to invest in Japan, Inc. Ordinarily, I would be fearful of investing in the highs and buying into strength, but the Japanese market will likely forgive poor purchasing decisions.
How am I so confident?
Because the future of money, your money, is distinctly Asian.
Referring back to Forbes, the top 5 global stock markets are:
1. Japan
2. United Arab Emirates
3. Argentina
4. Kuwait
5. Philippines
Politically, the United States has the strongest relationship with Japan and the Philippines from both an economic and military point-of-view. And while it may be argued that crude oil will leverage the strengths of the UAE and Kuwait, the harsh reality is, the energy sector is in a deflationary decline:
Technically, all indications point to the fact that crude oil (in all its variations) likely peaked in 2008 and will continue to descend. Advancing technologies and the rise of alternate fuel sources will inevitably render the concept of “peak oil” obsolete, at least in the foreseeable future.
While I am not a coroner, I personally pronounce the oil market as deceased.
Cause of death: old age (no need to call GATA for this one!)
Even natural gas as a ratio of Japanese Yen is on the decline, despite recent record shattering volatility in the FOREX market:
Ironically, Michael Maloney gave perhaps the best explanation of the above phenomenon of energy deflation in his speech for the 8th International Banking Forum in Sochi, Russia. His comments are becoming prescient but where we disagree is in the transition: Mr. Maloney believes that deflation will lead to hyper-inflation, but I see the emergence of a buyer’s market in the energy sector.
And this is why Japan is so crucial to your investment portfolio: it currently is a net-buyer of energy yet even their technologies will potentially enable them to economically extract both rare earth metals and natural gas deposits from their territorial waters. Countries such as Russia and the United States will be in heavy competition to supply Japan, even as Japan is finding its own resources: truly, the shadow of deflation in one sector is opening the door of opportunity to another.
And what about Nikkei 50,000? While I will not make the foolish prediction that we will see such a number tomorrow, I will emphasize that bull markets rarely peak when overall sentiment is at best disinterested. This will be quite a lengthy ride and once enough global confidence has firmly taken hold, we may very well see one of the most explosive bull runs in human history.
