The really great thing about following our "Unstoppable Global Trends" is that there are many ways to invest in each of them. The possibilities are endless, as is the profit potential. Take Demographics, for example.
We've talked a lot about what's happening in Japan right now in Total Wealth and the conditions there that make it the perfect "Anti-Trend" investment. Between the crushing debt, the aging population, the lack of a workable immigration policy, and decades of abysmal fiscal policy working against it, the country is in trouble – thus my recommendation to short the currency via ProShares UltraShort Yen ETF (NYSE:YCS)).
It's returned more than 116% since the Japanese yen was at 76 to the dollar when I initially recommended it to paid subscribers. And it's returned another 5% since November 26 when I brought it to Total Wealth readers' attention. Now it's set for another leg up.
But it's far from the only way to play Japan at the moment.
What I'm Seeing on the Ground
I'm writing this from Tokyo, and let me tell you that the reality of what I see on the ground here is very different from what you see in the mainstream media back at home. I say that because, contrary to what most ivory tower pundits and legions of investors who have never spent any time here think, Japan is unlikely to enjoy the broad-based recovery that we've seen in the United States. Most Japanese stocks, in fact, are going to fall flat.
But a select group is going to pop – especially the two I'm about to show you.
Today we're going to talk about how you can find them… by making more complex connections nobody else has spotted yet. That's part of what I've found here in Tokyo.
Abenomics – that's what the Japanese call Prime Minister Shinzō Abe's economic stimulus program – is largely a bust so far. The self-reinforcing cycle of higher wages, higher prices, and higher consumption that's the stated goal just isn't happening – at least not in any broad or meaningful sense.
Anecdotally, the evidence is all around me. For instance, I just stuffed myself silly at a local sushi restaurant last night, and the bill came to just $10. Breakfast was only about $5. My hotel, the Tokyu Stay, is a reasonable $125 or so a night. And this is in Tokyo – a city that was known as being one of the world's most expensive to live in.
I spotted Apple's (NASDAQ:AAPL) new iPhone 6 on sale for 75,800 yen, or roughly $642. The same model sells for $749 in the Apple Store. Or approximately $790 in Singapore, $870 in Germany, and $900 in Italy, if you convert the respective currencies back to the U.S. dollar according to a MarketWatch story I saw recently.
If this keeps up, I can envision a day when Americans go to Japan to shop, just like the Japanese used to come here, just because it's cheaper. It wasn't that long ago when the Europeans came to New York for the same reason.
People I've talked with on this trip give the economic stagnation I'm sharing with you some context via their personal stories. For example, 72-year-old Hiroshi told me over dinner that he's seeing prices going up and is getting left behind on his small teacher's pension. Hiroko, a 25-year-old office worker, chimed in with her own story when she heard our conversation. Her living arrangements, she said, are getting more expensive, and she's really having to struggle to make ends meet. Meanwhile, Kento, a 30-something salary man, echoed sentiments more commonly voiced in the United States: namely that the rich are getting richer while the politicians do nothing for the average citizen.
To be fair, Abe has no choice. He has to try something – anything – to break Japan free and regain a semblance of the prosperity it once knew.
Hence Abenomics. It's comprised of fiscal stimulus, structural reform, and monetary easing that are euphemistically called "the three arrows" by the Japanese.
For Americans who are keenly aware of the 128% rally in the S&P 500 since March 2009 that was prompted by similar Fed actions, this seems like an opportunity too good to pass up. So, millions of unsuspecting investors have bought in.
On the surface, this line of thinking makes sense. Japanese companies are sitting on cash equivalent to roughly 60% of GDP, the government is threatening to tax retained earnings, and there's a shrinking labor pool, so talented people are hard to find. Simply put, these should be ideal conditions for growth.
But remember, we're talking about an anti-trend here…
Japan Is Not Healthy, Fiscally or Demographically
Japan's demographic challenges mean its economy is destined to slide inexorably in the coming months and years. There's nothing Abe can do about Japan's dire demographical situation. And there's very little he can do to stimulate domestic consumption.
But he can delay the full brunt of the pain. And he's already doing it – through his own version of stimulus and weakening of the Japanese yen to boost exports in a frantic bid to put a floor over Japan's collapse.
Yet Abe's policies are still another attempt in a long line of efforts to shake off decades of moribund economic development. They change nothing. The average Japanese is getting pinched the way the middle class has gotten pinched in the United States and in Europe.
The recent election he won by a "landslide," and which the Western press is reporting as such a clear-cut mandate, actually had the lowest participation on record, with just 52.4% of voters casting ballots. The Liberal Democratic Party that Abe ostensibly leads actually lost seats. I think it could have been even worse if not for the fact that disillusioned voters had nowhere else to go.
Abe's plans, like Fed Chair Janet Yellen's undertakings, are all largely "window dressing" for the bankers and politicos.
The economy slipped into a recession when the consumption tax was increased from 5% to 8% last April, and Japan's gross domestic product for the July-September quarter dropped at an annualized rate of 1.9%.
That's important because what it tells you is that Japan is really not all that fiscally healthy. In reality, the country is wound so tight that a mere 3% increase in consumption taxes pushed the economy backwards.
Which totally reinforces what my newfound friends are telling me – the average consumer is still under tremendous pressure. Until that changes, there's no way to get around Japan's economic woes.
However you feel about that personally, this anti-trend spells "investing opportunity."