Jim Grant's Yen for Yen

In his latest Forbes column, James Grant recommends buying Japanese Yen:

The worst of it, for a yen bull, of which I am one, is the perceived certainty of things. At 121 to the dollar, the yen on Feb. 26 stood at a 15-year low against the euro and its predecessor currencies, and a 21-year low in real trade-weighted terms. Before the worldwide selloff that began on Feb. 27, there was supposedly nothing on the horizon to change things.

Grant's column also touches on Japanese stocks and the country's slowly changing corporate landscape. Regular readers of Controlled Greed.com know I have exposure to Japanese equities. So does Grant, who has a private investment fund called Nippon Partners:

As an investor in Japanese equities, I'll now talk my book. I believe that the yen is a worthwhile investment. It's a bargain in fundamental, purchasing-power terms, for one thing. And it provides low-cost disaster insurance, for another.

The yen is cheap for the merchandise it can buy today. It is also cheap for the corporate assets it could buy tomorrow, if only Japan's famously shareholder-unfriendly corporate managements would wake up to the best practices of the 20th century, never mind those of the 21st.

But more and more, they are. Late in February, for example, a Japanese fund manager did the heretofore impossible. Ichigo Asset Management, with all of $25 million under management, solicited more than 42% "no" votes to oppose the proposed acquisition of Tokyo Kohtetsu Co. by Osaka Steel, a union blessed by the two corporate managements and therefore, under the old rules, a done deal. But the rules have changed, and the merger is off.

Ichigo's success in blocking this transaction represents a bell-ringing first.

Grant goes on to write some things you've read here, among other places if you're a value investor. That many Japanese companies are cheap based on their assets. And that too many managements aren't exactly shareholder friendly.

His piece also discusses the "yen carry trade" and suggests an ETF that invests in yen.

Jim Grant has been wrongly written off as a "perma-bear" -- but he's actually a top-notch stock picker and his Forbes columns are real treats.

Comments

[Peter]

I too am a big fan of James Grant and have recently bit the bullet and subscribed to his Interest Rate Observer (a big investment for an individual). However I do sense his passion is always based on hard work and he is a great writer; this is very helpful to a person without an economics background. He can pick stocks too. Based on his recommendation I bought the Indian Bank ICICI (IBN) at $22; but sold it way too fast - it is now at ~40.
BTW, have you heard Jim Roger's most recent take on the Real Estate crisis? He believes the emerging markets will get crushed and he is out of everything except China. Jimmy is another interesting guy. Keep up the good work!

[John]

Peter: I too have bit the bullet and subscribed to Grant's Interest Rate Observer off and on over the years. You're right, it's a lot to pay for an individual.

I hurriedly read a report of Rogers latest comments yesterday. My memory is he's expecting China to drop as well. You're right, he's an interesting guy, as is Marc Faber. I thoroughly enjoy reading them. But I've never bought -- or not bought -- a stock based on their comments. On a stock-by-stock basis, Jim Grant is much more valuable, IMHO. Thanks for your comments.

[David Merkel]

I wrote about Grant's comments on the yen over at RealMoney.com, and over at my blog. You point out something that is little known about Grant's Interest Rate Observer (of which I am a subscriber); he has been pretty at picking longs and shorts, particularly of late.

What is interesting about the yen at present is that it has become a barometer of systemic risk fears, particularly if you look at the Aussie-Yen cross rate, though USD-Yen will do.

I enjoy your stuff, keep it up.

[John]

David: I'm not much of a short seller (never have engaged in it), but I agree with your point that Grant's stock-picking is not well known. Thanks for reading, and commenting.