Perspectives on the Japan Earthquake

Charles Sizemore, Editor of the Sizemore Investment Letter, gave his analysis of the developing crisis in Japan to Reuters following the earthquake and tsunami and offered his suggestions of how investors can profit from an improvement in sentiment.

BOSTON, March 15 (Reuters) – Japan’s stock market, usually one of the world’s dullest, has turned into a gripping 24-hour roller coaster fueled by fear and punctuated by only short moments of relief.

The U.S.-listed iShares MSCI Japan Index exchange-traded fund (EWJ) turned over 400 million shares worth some $4 billion on Tuesday, more than 10 times the fund’s average volume over the prior three months. Another 37 million shares traded in the first hour on Wednesday on the New York Stock Exchange.

Why would anyone want to trade amid such uncertainty?

“American investors wanting a short-term play on a Japanese recovery can consider (the fund),” Charles Sizemore, who runs Dallas money manager Sizemore Capital Management, said. While not advocating a long-term bet on Japan, “in the short to medium term, I like Japan as a contrarian value play. Natural disasters tend to have only very short-term effects on the stock market,” Sizemore added.
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Why the West Rules—For Now

Why the West Rules--for Now: The Patterns of History, and What They Reveal About the Future
It was the most humiliating day in the history of the British Empire. Britain had been conquered before—by Romans, by Anglo-Saxons, by Vikings, by Normans—but nothing like this. Never to a people so strange and foreign.

On April 3, 1848, Queen Victoria, Prince Albert, the Duke of Wellington, and much of the court knelt in the rain on London’s East India Docks…waiting. Governor Qiying’s armada would be arriving from China at any moment, and Victoria would be expected to pay her respects to His Majesty, the Grand Exemplar, the Cultured Emperor Daoguang, submit to his overlordship and open British ports to Chinese traders.

Victoria would live the rest of her life in shame, going down in history as the queen who lost Britain to heathen infidels.

Of course, none of this actually happened. On that date in 1848, Victoria and Albert went to the East India Docks not as vassals to a new master but as tourists—to view a Chinese junk that British businessmen had brought back from Hong Kong.
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Book Review: The Age of Deleveraging

The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and DeflationGiven the strong rebound in the equity markets since March 2009, “most investors believe that 2008 was simply a bad dream from which they’ve now awoken,” starts Gary Shilling in his newly-released tome on deflation, The Age of Deleveraging. “But the optimists don’t seem to realize that the good life and rapid growth that started in the early 1980s was fueled by massive financial leveraging and excessive debt, first in the global financial sector, starting in the 1970s, and later among U.S. consumers. That leverage propelled the dot-come stock bubble in the late 1990s and then the housing bubble.”

Dr. Shilling has had a long and wildly successful career as an economic forecaster. Shilling was one of the few voices of reason that foresaw the busting of the Japanese bubble of the late 1980s, and he also correctly forecasted the bursting of the 1990s Internet bubble and the mid-2000s housing and financial sector bubble. I am delighted to find him on “our” side of the inflation/deflation debate.
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How to Choose the Right Dividend ETF

The stock market hasn’t returned a single red cent in over twelve years, as measured by the S&P 500. Twelve years is a long time to go without earning a return on your investment, particularly if you are close to retirement.

With the boom years of the 1980s and 1990s now a distant memory, it is not shocking to see investors losing faith in the cult of capital gains and gravitating instead to dividend-paying stocks and ETFs. In a world in which paper gains can be ephemeral, it’s good to be paid in cold, hard cash.

In many ways, this is simply a return to the basics of investing. Historically, before federal capital gains taxes and Modern Portfolio Theory shifted the industry to a focus on growth, dividends were the primary source of investor returns (see Figure 1), and over the past twelve years dividends have been the only source of investor returns.
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