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Jeff Saut: Four Reasons to Get Bullish on Japan


What's good for China is good for the Land of the Rising Sun.

I recently spent 8 days in New York City. The plane to LaGuardia was late due to torrential rains and, as I sloshed down the gangway into the terminal, I felt like I had traveled back in time, since that airport -- along with much else in New York -- is in serious need of renewal.

Indeed, certain parts of my taxi were held together with duct tape, and, over the course of my rush-hour journey, I proceeded over potholed streets, decaying bridges, and dead zones that dropped every one of my phone calls. All in all, I felt like I was in a Third World country -- not the greatest city in the world.

Contrast that experience with the one I had in Singapore's Changi Airport, which has become the gateway to emerging and frontier countries. With more than 80 airlines serving more than 180 cities, Changi remains a benchmark for service excellence, having won more than 280 awards, 19 in 2007 alone. Travel to and from the airport is modern and efficient, both by road and rail. Indeed, there are no potholed roads, no old taxis, no decrepit trains, no "dropped" phone calls... Well, you get the idea.

This diatribe has a point: If we've embarked on a new worldwide bull market, I believe the new leaders are likely to be emerging and frontier markets. That view was reinforced by the astute GaveKal organization, whose seminar I attended last Thursday. I love the GaveKal folks because they're truly "outside the box" thinkers -- and it's that kind of thinking that produces net-worth-changing ideas.

Louis Gave opened the presentation by noting, "Things are feeling better because they are better -- largely because of Asia." Arthur Kroeber, who's an expert on both China and Asia, went on to say that China's economy has grown by roughly 10% per year for the past 30 years, largely driven by exports.

Arthur made the point that export growth is really a "technology transfer," as foreign companies share their know-how (manufacturing, warehousing, distribution, etc.), allowing China to leapfrog up the learning curve much faster than it could have on its own. Clearly, such a technology transfer causes a huge improvement in labor productivity. More recently, however, the Western World's recessions have caused China's export growth to slow.
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