EVERYONE SHOULD READ THIS--WHAT DO YOU THINK???????
Wrong! Rear Echelon Revelations: Japan Is Turning Around
By James J. Cramer
11/2/98 12:15 AM ET
The Financial Times has been covering this Japan story like a rug. They own it and have become the single best way to understand this unfolding positive story.
First, let me say, I am no foreign expert. My firm has traditionally never put more than 10% of its assets overseas. I am not the axe in foreign and don't pretend to be. It is probably why I have survived all of these years.
Second, my information is purely derivative. I have no man in Japan and I have no contacts there.
That said, it is pretty clear from everything we see, whether it be Justin Lahart's excellent series in TheStreet.com or a bizarre dinner I had the other night with some representatives of a major regional Japanese bank, that the Japanese are richer than we think. Richer than everybody. Just poorly run and noncapitalist, in the way that our country was poorly run and noncapitalist during the Carter era.
So, I have taken to monitoring the situation more closely, which means devouring the 20 articles a day they have in the FT about Japan.
Japan is turning.
It is happening for a couple of incredible reasons. First, Prime Minister Obuchi came in with incredible low expectations. Everyone thought he would be able to do nothing. But, to use Wall Street terminology, this guy is surprising to the upside. That's huge.
Second, after years of seeing good quarters from Japanese companies even though we all knew they were getting their heads handed to them, they are now reporting the kind of stink-o quarters that we should have seen for some time. I am not saying that they were lying about their financials, but I do think that they are now owning up to their difficulties, which is stage one of the psychology of bottoms.
Third, they are reliquifying. They are selling many, many things in America, from stubs of banks to whole divisions. They are retrenching furiously. They have probably sold billions of dollars in U.S. bonds in the last three months. They are repatriating to invest in their own market, which is good news.
Fourth, their banking plan, which everybody scoffed at initially, is as vicious and as credible as ours was when we decided to get tough. Banks are closing left and right. Banks are merging. It is unprecedented. Other than the FT, though, nobody gets it, which is why I urge you to start reading their coverage.
Finally, the market is cheap, statistically. I am no fan of the doom and gloom of Jim Grant, but he is a good measure of traditional value. He sees value, there is value. He is a decent arbiter of value and I will take his word for it.
Finally, I don't know a soul who is betting this way, except guys who have always been betting this way, and that's been a very foolish bet. I know plenty of people betting against Japan, though.
That seems wrong, too. Don't ask me what to buy over there, I am trying to buy things that mimic the nonbrainer S&P. I am not trying to take a big swing, that would be wrong given the domestic nature of my fund. But I am shopping there and I like what I see.
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