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
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...
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Japanese real estate investment trusts (REITs) are a great bargain, down 29% since June 1. |
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Dividend yields are the highest income plays in Japan, in the 4% range. |
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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%. |
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Rents in Tokyo are up 30% in the past two years. |
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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. |
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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
Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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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.
- Brian Hunt |
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In China, soaring food prices have driven inflation to their highest levels in more than a decade, straining household budgets in the world's most populous country. Dramatic price increases have been chalked up to an unfortunate confluence of factors – supply problems endemic in China's pork industry, an outbreak of "blue ear" disease on pig farms and to drought and flood-related price hikes. But behind these events, a host of structural problems are contributing to higher prices.
China feeds 22 per cent of the world's people with only 7 per cent of its farmland and must do so with a poor endowment of agricultural resources. Compounding matters, China's per capita water supply amounts to just a quarter of the global average and is unevenly distributed.
A wealthier generation of Chinese consumers is shifting from traditional meals to a diet heavy in meat, eggs and dairy products. China's urban population – which is growing by 15m-20m people a year – consumes three times more meat than the rural population. |
– Jing Ulrich
Financial Times
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Soybeans in Chicago rose after Argentina, the world's third-biggest supplier of the oilseed, increased taxes on exports of the commodity and other crops to boost government revenue and increase domestic supplies.
Taxes on soybeans, the nation's biggest export crop, rose to 35 percent immediately from 27.5 percent, Economy Minister Miguel Peirano said yesterday in Buenos Aires. The levy on corn rose to 25 percent from 20 percent, and wheat is taxed at 28 percent, from 20 percent previously.
Soybeans for January delivery jumped as much as 6.50 cents, or 0.6 percent, to $10.45 a bushel in after-hours trading on the Chicago Board of Trade, and traded at $10.425 at 5:30 p.m. Beijing time. The futures reached a three-year intra-day high yesterday as crude oil rose to a record.
Only the U.S. and Brazil export more soybeans. Argentina is also the largest supplier of soybean oil to China, the world's biggest buyer of soybeans and vegetable oil. |
– Bloomberg |
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