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Uh-Oh...By
Monday, March 5, 2018
"Little-Known 'Mr. K.' Just Set Up the Best Trade of Our Lives."
That was the headline to the December 2016 issue of my True Wealth newsletter.
It turned out to be a great trade...
Subscribers that followed my recommendation made 34% gains (before we switched out of the position last month).
"If Mr. K does what he says he's going to do – and we have no reason not to believe him – then we could potentially make more on this one trade than we have on any other investment in our lifetimes," I said. "This trade could run a few years."
The trade started in late 2016. It worked all the way through 2017.
I thought we had a few more years left.
But... well... uh-oh...
Last week, Mr. K. publicly raised doubts about how long the tailwind for Japanese stocks could last.
Japan's main stock market fell 2.5% the day he spoke. And Japan's currency – the yen – soared.
So who is Mr. K.? What did he say? And should we believe him?
Let me answer each of these, quickly...
Mr. K. is Haruhiko Kuroda, the head of Japan's central bank. In late 2016, I wrote:
Kuroda set extreme targets, and he planned extreme measures to hit those targets. Specifically, he forced the interest rate on the 10-year Japanese government bond to near zero. And he's been trying to force inflation up to 2%. Investors in Japanese stocks (like us) saw this as a one-way bet. It was a recipe for ultra-low interest rates and ultra-stimulative government policies. That should cause soaring stock prices. We bought.
It worked. Then, last week, Kuroda started to change the script. Here's what he said...
The thing is, Kuroda doesn't just want inflation to reach 2%. He specifically wants to dramatically overshoot that 2% target. And even when he spoke last week, he said that this "overshooting commitment" is still in place. Here's what he said back in 2016, around the time we put on our True Wealth trade:
Japan is nowhere near overshooting 2% inflation. And it won't be in 2019, either. Long story short, Kuroda ain't doin' nothin'.
He might be talking about doing something...
But he ain't doin' nothin'.
The one-way bet is still in place. Buy Japanese stocks.
Good investing,
Steve
Further Reading:
"This Japan setup is as good as it gets," Steve writes. To learn more about "Mr. K" and the bullish picture for Japanese stocks, check out his essay: A Huge 113,000% Rise in Seven Years – And Plenty of Upside Ahead.
"For many people, there's no place like home," Kim Iskyan says. "But for your portfolio, staying at home means taking on a lot more risk than you might realize." Learn more about "home-country bias" right here.
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NEW LOWS OF NOTE LAST WEEK
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