If you follow the world economic news, you probably have heard "Abenomics". It is about the Japanese fiscal and monetary policy spearheaded by the Japanese Prime Minister Shinzo Abe since 2 years ago that they would print as much money as possible to bring up their inflation levels. This is a Japanese version of QE but in a much large scale, considering the size of their economy. I firmly believe this is a futile effort and the start of the end of their hopeless economy! In the long run, it is a suicidal attempt!
Through this J-QE, the Bank of Japan would buy up to $610 billion in bonds a year. But they just announced last month that they will add more to the purchase up to almost $700 billion. I feel sorry for the Japanese people as eventually the country will crash under the ever increasing debt load. But in the short and intermittent terms in the next few years, 2 things will happen. The immediate impact is the weakening J-Yen. I suggested to short Yen in Apr 2013 via YCS when it was around $40. Now YCS is over $80, almost doubled. In other words, in the past 2 years, Yen has significantly weakened due to this QE policy. On the contrary, a weakening Yen and flooding cheap money will boost the stock market in a big way. To ride this trend, one good means is via Wisdom Tree Japan Hedged Equity ETF (DXJ). The beauty of this ETF, as its name implies, is that it is actively hedging against the fluctuation of Yen. In other words, you can enjoy the booming stock market in Japan while the risk of depreciation of Yen is minimized. I think this is a good deal for those who want to diversify their portfolio with more exposure to international stocks.
No comments:
Post a Comment