September 26, 2003

Our Man In Japan

Below is a note from my old high school debating partner, Jason Kelly. Since our glory days as extemporaneous speakers and Lincoln-Douglas debaters, Jason has gone on to author six books, including five on investing. You can find them at Jason lives in Japan now. Although he tends to be bullish, we keep a lively debate going. And I figured instead of me telling you what I think will happen in Japan, I'd ask Jason what actually IS happening in Japan (other than the big earth quake). His response is below. Jason's reports suggests that North Korea is a lot bigger issue in Japan than in the United States, so much so that Japan may consider going nuclear. This puts an interesting gloss on my post last week that Japan is tolerating a stronger yen to aid a Bush reelection in exchange for some security guarantees on North Korea. Also, even hardcore Bush folks are starting to getting upset. Not about the WMDs neccessarily. But about the going back to the U.N. hat in hand. Is Bush vulnerable? Is it too late for John McCain to get in the mix? We'll see... Konichiwa Dan, Thanks for sending me a copy of your latest missive. I read the entire piece and found it interesting on a number of fronts. The mists on the Rhine contrasted to the woman packed into her leopard-skin top was good. I'm glad you were able to enjoy the beer. On investing, I've also been watching the plummeting dollar here in the Land of the Rising Sun. There's no other way to describe it. Have you seen a recent chart? Look at this (yen versus the dollar): I remember reading many times in the past year that the BOJ would not allow the yen to drop below 115 per dollar, and now it's at 112. There's a lot of pressure from the G7 to float the paper, but Japan can be a stubborn SOB when it comes to keeping exports competitive. What else does the island have? Regardless of your or my position on the long term sustainability of the Japanese economy in a weaker dollar climate, the BOJ doesn't seem to see it that way. I, for one, am betting that the dollar will continue its bearish trajectory. Betting for real, as in hoarding yen for a big transfer back to a U.S. bank account when the rate drops below 100. How long will I have to wait? I thought a long time, but that short-term chart is pointing hard in the down direction. With the dollar weakening, gold is shining brighter. I agree with you on that score as well. Time to get into a gold fund. I second your general assessment that Asian growth makes for a good investment. I deduce that you've suggested EWJ, among others. That's prudent. Since May, it's up from about $6.50 to roughly $9, if memory serves. That was after a long sideways action around $7 that finally broke out. Before I sign off, it's a coincidence that I spoke a few days ago with Herr Neering, our man in Germany. [also an old high school friend who was in the Army in Germany, married a German woman, and has settled down there.] He was a staunch supporter of Bush before and during the Iraq war. His neighbors attacked him with all the textbook anti-American arguments and Jim responded with the textbook pro-American rebuttals. Now that there seem to be no WMD, and we still haven't found Bin Laden, and the USA is sinking into an ocean of debt, Herr Neering feels taken. He's angry and looking for a new president. The capper was when Bush showed up to the U.N. hat in hand to ask for help cleaning up the mess he created without U.N. approval. I couldn't help agreeing with Jim. Things become all the more difficult to stomach in this part of the world when considering the N. Korea situation. Let's see, no weapons equals all-out war in Iraq. Known weapons equals months of talking in N. Korea. Did you know that the situation is so tense that Japan -- the most anti-nuclear country on Earth because of Hiroshima and Nagasaki -- is considering arming itself with nuclear missiles? Many people don't know that. It's not a go yet because there is tremendous resistance, but a lot of people have noted that the U.S. is preoccupied with the Middle East and that minutes lost waiting for help as Pyongyang targets Tokyo could mean the end of Tokyo. Time needed to go from zero nukes to a formidable arsenal? One month. Japan is only toothless because of its treaties with the U.S. and its own anti-militarism. Sayonara, Jason


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