Investment Contrarians

Japanese Economy

The Japanese economy is the third largest in the world, following the United Sates and China. According to the International Monetary Fund (IMF), the Japanese economy reached a per capita gross domestic product (GDP) of $34,739, which was the 25th highest in 2011. For decades, the Japanese economy has been mired in a deflationary spiral, showing weak and anemic economic performance. The Japanese economy suffered from a bust in the late 1980s. Since then, it has failed to restructure itself and build a new foundation for growth.

Monetary Stimulus Leaving Average Americans and Precious Metals Behind

By for Investment Contrarians | Nov 14, 2013

Leaving-Average-Americans 2Why is the average American falling behind in our economy?

Millions of Americans feel as though they are being left behind while the disparity between themselves and the rich continues to grow.

Over the last few years, the Federal Reserve has enacted the most aggressive monetary stimulus program in the central bank’s history. But even with the Fed’s trillions of new dollars thrown into the economy, most Americans do not feel any more financially secure or wealthier than before.

Now, when we look at the stock market, one could easily assume that the monetary stimulus brought on by our central bank is having a positive impact.

Let’s take a look at another country whose central bank has also been pushing a very easy monetary stimulus program for years; of course, I’m talking about the Japanese central bank.

We all know the Japanese economy has been in a slump for multiple decades. If monetary stimulus were the answer to all ills, why is Japan’s economy still weak? Let’s take a closer look at the average Japanese citizen for the answer.

According to a report by Japan’s central bank, 31% of Japanese households have no financial assets—a new record-high. This survey has been conducted since 1963. (Source: Bank of Japan web site, last accessed November 12, 2013.)

How could this be? The central bank in Japan has been pushing a very aggressive monetary stimulus program, which has led to a drop in the value of the country’s currency and an increase in the stock market in Japan of approximately 60% this year.

While monetary stimulus by the central bank did help push … Read More

Why I Don’t Believe the Emerging Markets Are Dead

By for Investment Contrarians | Sep 3, 2013

Never Mind the Chatter; Emerging Markets Are Worth a LookWhile so many are chattering on about how the emerging markets are dead—I’m not one of them.

Yes, the emerging markets are struggling to find some ground, given the stalling in the economies of their key partners, China and Europe; but my feeling is that the worst may be over, and you may want to start watching this region.

The iShares MSCI Emerging Markets (NYSEArca/EEM) exchange-traded fund (ETF), which encompasses over 20 global markets spread across Asia, Europe, South America, and South Africa, is down from its multiyear highs, as shown by the top blue horizontal line on the chart below.

EEM iShare MSCI Emerging Markets NYSE Chart

Chart courtesy of

A retracement back to the top in 2007 and 2011 at around 50 could translate into a 31% move up from current levels. The key is for the downside support to hold, as has been the case since 2010.

Yes, the emerging markets are currently looking for buyers and domestic consumption growth to drive gross domestic product (GDP) growth, but as I said, China and Europe, along with many other regions in the global economy, are not buying. But this doesn’t mean you should avoid the emerging markets.

You should actually take the opportunity to seriously look at adding positions in the emerging markets at these multiyear lows, rather than waiting and buying after a rally.

Now I’m not sure if a rally is on the horizon, but what I do know is that the emerging markets are not going to be dead money forever.

My thinking is that once the global economy stabilizes, renewed growth in Europe, the United States, and China will help … Read More

What Will Happen in the Wake of Today’s FOMC Meeting?

By for Investment Contrarians | Jun 19, 2013

Grumblings of Fed’s TaperThe wait is over. The Federal Reserve will conclude its Federal Open Market Committee (FOMC) meeting today and, of course, all of you will know what Chairman Ben Bernanke’s current thinking will be.

We have been hearing grumblings from other Federal Reserve members across the nation about how the voting members should consider tapering the Fed’s bond buying.

While there has been no timeframe offered, the overall feeling, including mine, is that the Federal Reserve must have an exit strategy in place.

The economy is showing signs of improving in consumer spending, gross domestic product (GDP) growth, the housing market, and manufacturing; albeit, the jobs market is still not at the level that the Federal Reserve wants to see.

Yet, as many of you are aware, I have been concerned about the flow of easy money, a flow that has helped to drive the global economy and stock markets.

In my last article, I commented on the big Ponzi scheme created in Japan through the adoption of “Abenomics” by the country’s free-spending Prime Minister. The trillion-dollar stimulus plan drove up the Japanese Nikkei 225, but the rate was way overblown. Japan’s economy is showing signs of improving, but just like the U.S. economy, the Japanese economy is artificial.

Wait to see what happens once they start tapering the monetary stimulus. The potential result from this tapering is why stocks were under pressure leading up to today’s meeting. In Japan, when the Bank of Japan recently refrained from adding additional stimulus, stock traders ran for the exits.

Trust me: the same will happen here when the Federal Reserve announces its intentions, … Read More

What McDonalds Has to Say About the Global Economy

By for Investment Contrarians | Apr 30, 2013

McDonalds Has to Say About the Global EconomyYou can tell a lot about the pulse of the economy by examining the retail sales and restaurant sector. When people are working and making money, they tend to be more confident and want to spend, especially non-discretionary spending.

In the fast-food restaurant sector, the “Best of Breed” is McDonalds Corporation (NYSE/MCD).

The company has numerous rivals and the sector is extremely competitive, but there is no real and valid threat on the horizon for McDonalds that could affect it.

Characterized by its familiar “golden arches,” which are sometimes visible from miles away, the company is a true American icon, just like General Motors Company (NYSE/GM).

Yet McDonalds is also a decent indicator on how the United States and global economy are faring.

The current level and valuation of stocks suggest everything is going well and on target with the global economy.

But, sorry to break it to you: the path to sustained economic renewal is still filled with potholes.

As I’ve previously written in these pages, the global economy and performance of the stock markets have been built by the easy money injected into the global monetary system by the world’s central banks, including our friends at the Federal Reserve.

So when I begin to see slowing at some of the key multinational companies, I wonder about the condition of the global economy.

McDonalds is a decent barometer on the global economy and, based on what I’m seeing, I sense there’s some stalling in the global economy.

In the first-quarter earnings season, McDonalds reported a marginal one-percent rise in its consolidated revenues due to the slowing in Europe and … Read More

How You Can Profit from the Currency Wars

By for Investment Contrarians | Jan 18, 2013

Profit from the Currency WarsRecently, we have heard a lot about currency wars being waged by various nations around the world. To those who are unfamiliar, “currency war” is a term that refers to countries that are actively looking to devalue their currency to help stimulate export growth and their domestic economy.

Investing in stocks in this type of environment can be tricky, as one needs to add additional variables to the analysis. Having a strong market sector, solid long-term fundamentals of the individual stock, and a favorable currency direction can help when considering investing in stocks.

While many look to the Federal Reserve as being the most active in trying to devalue the U.S. dollar, I would point to Japan. Newly elected Japanese Prime Minister Abe has been vocal about demanding massive and unprecedented monetary stimulus by the Bank of Japan to help stimulate the Japanese economy.

Large institutions interested in investing in stocks certainly have jumped on the export-oriented market sector, as Japanese stocks are up approximately 24% since mid-November, when elections were announced, and the yen is down in value by approximately 10%.

However, this is not a short-term phenomenon. I believe the yen will continue to remain weak for a long time, and this will benefit the Japanese export market sector. Those interested in investing in stocks could look to equities in Japan that will benefit from the yen’s devaluation.

One market sector that also has strong fundamentals in the U.S. is vehicle sales. The U.S. had extremely strong car sales in 2012, and I expect 2013 to be just as strong. When combined with a further lowering of the … Read More