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Editor's note: If you'd like to learn more about investing in Japanese real estate, you can also read Steve's essay, Time to Buy Japanese Real Estate.

 

Six Reasons Why Japanese Property Will Soar

By Dr. Steve Sjuggerud
Friday, November 9, 2007

I received an e-mail from my friend Peter Churchouse earlier this week...

In his e-mail, he was excited about one area of the markets in particular... but before I tell you what market that is, let me share a little about Peter Churchouse...

I look up to Peter. I used to read his writings every week when I started covering Asian stocks back in the early 1990s. Peter's a New Zealander, but he was based in Hong Kong as a managing director for Morgan Stanley back then. (He's still in Hong Kong today – I spent a week with him there earlier this year.)

Today, he's basically independent, working with a relatively small asset management company. Independence suits him... as he launched his unique hedge fund back in 2004. The fund focuses exclusively on Asian real estate stocks, and it's up an extraordinary 70% in the last two years.

He continues to get it right. Last May, he told me about the no-brainer in Malaysian property stocks, as they were ignored by the mainstream. They soared. Then...

In January, we met in Tokyo to talk about the incredible values in Japanese real estate stocks. We also came up with the idea for a book about investing in China. The basic idea was that China could be on the brink of the greatest financial asset mania the world has ever seen. Well, as you might have guessed... with China soaring, we've scrapped the book. I've returned the advance from the publisher. The China mania arrived before the book could hit the shelves.

Now, Peter has once again turned his attention to Japanese real estate stocks...

In his e-mail to me, he listed reason after reason why Japanese real estate is a great place for our money...

• Japanese real estate investment trusts (REITs) are a great bargain, down 29% since June 1.
• Dividend yields are the highest income plays in Japan, in the 4% range.
• There's a huge incentive to borrow and buy real estate, as "cap rates" (essentially the rent minus the costs of upkeep) are 4%-6%, while the cost of borrowing money is only 1.5%.
• Rents in Tokyo are up 30% in the past two years.
• The city is crawling with investment bankers looking to buy properties... companies like Goldman Sachs, which has already spent billions investing in Tokyo real estate.
• There is no supply... vacancy rates in Tokyo real estate are tight at 2.6% and there isn't much new building taking place.

Peter is right... the opportunity is enormous. Japanese real estate is literally selling at 1980s prices. It's unbelievable.

In my newsletter Sjuggerud Confidential, I've recommended investing in the stock that I think will give us the biggest bang for our buck when this market finally takes off. And in my newsletter True Wealth, I shared an investment that I helped develop, which gives readers infinite upside potential in Japanese real estate stocks, with NO downside risk.

Japanese real estate stocks may turn out to be the very best investment you can possibly make over the next five years.

I suggest you find a way to get in soon.

Good investing,

Steve

Market Notes


AN UNUSUAL CHART, AN UNUSUAL UPTREND


Our chart today is unusual. It's not focused on one particular asset, as we usually do, but instead it looks at an unbelievable strong "ratio" shaping the world...

The ratio is the price of gold vs. the share price of Nordstrom, one of America's largest high-end retailers. Gold represents timeless, real wealth. Nordstrom represents the desire to spend $100 on a shirt. For most of this decade, credit-fueled materialism trumped the price of gold... and Nordstrom shares rose much higher than gold.

Now that folks are realizing the world isn't so stable and safe, gold is absolutely soaring against mortgages, Hummers, flat-screen TVs, stocks, clothing, motorcycles, and boats. You can see this outperformance by the rising trendline below. The price of gold is rising, and the price of Nordstrom stock is falling.

We're not picking on Nordstrom. Everybody likes to blow a few bucks at the mall. We could display the ratio of gold vs. Harley-Davidson, Starbucks, Pool Corporation, or Brunswick. The picture is the same: Real money is becoming worth a great deal more than stuff that will end up in a landfill.

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