Here’s a handy way to know when to sell your investments: everyone is talking about them.
There is an obvious corollary to knowing what to sell. If you want to know what to buy, consider what no one is talking about.
And that brings me to investing in Japan…
From a high near 40,000 in 1989, the once-mighty Nikkei 225 – the equivalent of our S&P 500 – fell over 80% and hit a 27-year low early last year. It’s still more than 70% below the highs of 21 years ago.
The main culprit – aside from a real estate bubble that made the one here in the United States look bush-league – was misguided government policies. Japan waited too long to clean up its ailing banking system and spent trillions on public works projects that simply weren’t needed.
However, Japan has a new government that has promised to shrink the country’s massive bureaucracy and cut wasteful public spending. It also intends to end more than 20 years of economic stagnation by cutting taxes and focusing on small and mid-sized businesses.
Japanese stocks have rallied off the lows of 10 months ago. In fact, the Tokyo Exchange is one of the world’s best-performing bourses so far in 2010.
But it’s still among the cheapest and most unloved in the world. Virtually no one is enthusiastic about Japanese stocks.
Alexander Green is the Investment Director of The Oxford Club. A Wall Street veteran, he has over 20 years experience as a research analyst, investment advisor, financial writer and portfolio manager.
He is also Chairman of Investment U, an Internet-based research and education service with over 300,000 readers. He currently writes and directs the twice-weekly Oxford Portfolio Update e-letter and three short-term trading services: The Momentum Alert, The Insider Alert and The New Frontier Trader. Mr. Green is also the author of The New York Times bestseller The Gone Fishin? Portfolio: Get Wise, Get Wealthy...and Get On with Your Life.
I hope you have a better fundamental case for Japanese stock than just “nobody’s talking about them”. Nobody is talking about Burma real-estate, used refrigerators or pine trees either, but that doesn’t automatically make them good investments.
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