[Kyoto, Japan] - Many investors have piled into Japan lately reasoning that somehow this will be "the year" Japan turns around and there will be lots of money to be made.
I don't disagree - only the big profits are on the short side, especially when it comes to these three iconic Japanese tech brands.
As I quipped earlier in the year, it's more likely that Godzilla will walk out of Tokyo Bay again than it is that Japan will suddenly rebound.
I am well aware that's not a popular thought and that it will likely earn me my share of wrath on the Internet. Save your breath and your keystrokes. Having spent more than 20 years in country, I am intimately familiar with the arguments.
For example, value-oriented investors consistently remind me that the Nikkei is "dramatically undervalued." I am also well aware of the "construction boom" that was supposed to follow the tsunami and nuclear crisis.
And I still continually hear from the statistically motivated that the Japanese economy just "has to turn around" because it's exceedingly rare that an economy remains in the doldrums after 20 years.
The Nikkei remains 75.5% off its December 29, 1989 peak for a reason. That means it's going to take a 308.19% gain just to get to break-even based on where it's trading as of this writing.
If you think that's a sure thing, I'm happy for you but wish to point out that business conditions now are hardly conducive to the kind of growth that got the Nikkei there in the first place. The entire society is deleveraging. Consumers are tapped out and the government is a wreck.
As for the construction boom, that's a misconception. As I noted in a flurry of interviews following the terrible events of March 11, 2011, only a few companies are going to enjoy any sort of revenue expansion whatsoever. Sure, there might be a short-term pop, but the majority would experience significant drops in revenue and exports resulting from production losses and a post-quake strengthening of the yen that will compound the efforts to regain lost ground.
And finally, as for the notion that markets simply don't stay down for this long...says who?
It was inconceivable in 1990 that Japan would lose a decade -- let alone three. Nine failed stimulus programs and 22 years later, the Japanese economy has just lurched into another technical recession this week. The rules of the game have changed.
Clearly, the markets can, as the old saying goes, remain illogical far longer than investors can remain solvent.
Here's the Reader's Digest version of my thinking: