The Next Domino to Fall After Japan?
Now is the time to prepare your short-side strategy.
We like Japan on the short side. The volcanic real estate and stock market eruption of long ago resulted in a lava flow of deflation. Japan's red ink is flowing like blood from a gushing flesh wound. Japan's government debt is the largest among advanced global economies, now standing at 172% of Japan's gross domestic product in 2008. Most economists project that number to eclipse 200% next year. They also expect Japan's economy to shrink again in 2010. Japan's Central Bank predicts Japan will be engulfed in deflation for the next two fiscal years. That means lower prices are ahead. Simon Johnson, former chief economist of the IMF told the US Congress that Japan's debt was out of control and that there is "a real risk Japan could end up in a major default". It appears that Japan is trapped in a deflationary death spiral and the deflation should soon start flowing again.
The cost of insuring Japanese government bonds against default are raising rapidly according to Credit Derivatives Research. In fact, that cost has doubled recently. Many market observers believe that Japan could be the first domino to fall, with fears of a government debt default causing their stock market to retest the March 2009 lows. Should that domino fall, it would hit the US hard, which in turn would hit China, Canada, Germany, Italy, India, etc... as the global dominoes fall one by one. With government stimulus packages winding down, now is the time to prepare your short-side strategy for such a possibility.
With Japan having given a sell signal weeks prior to the launch of this newsletter, we are now looking for the next domino to fall instead of chasing the first.
To read the full report containing Ron & Denny's thoughts on which country is the next domino and the recommended ETF to play it, sign up for your FREE two-week trial today!
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Ron Coby & Denny Lamson are the authors of the Grail ETF & Equity Investor newsletter. The Grail ETF & Equity Investor contains Messrs. Coby and Lamson's own opinions, and none of the information contained therein constitutes a recommendation by Coby, Lamson or Minyanville that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Messrs. Coby and Lamson will not advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. All information contained within the Grail ETF & Equity Investor newsletter is impersonal and not tailored to the investment needs of any specific person. Do not email Messrs. Coby or Lamson seeking personalized investment advice, which they cannot provide. Messrs. Coby and Lamson's past performance is not a guarantee of future performance and there is no guarantee that the suggested investments will have the desired results. The performance represented here is for informational purposes only, and should not be construed as an offer or solicitation of an offer to sell or buy any security. Please keep in mind that this Portfolio does not necessarily account for the different risk tolerances, investment objectives, and other criteria used by individual investors when making an investment decision. You are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional before you make any investment.
Addition information on Coby Lamson can be found in its form ADV Part II located at www.cobylamson.com
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