We really enjoy starting our weeks with the latest market musings from Raymon James strategist Jeff Saut, who has been so dead on throughout the past several months.
After a few weeks of caution — which he called — Saut is bullish again.
Setting the stage for the stock market’s reversal has been relatively constructive economic data implying that the first revisions of 4Q09 GDP (due 2/26) are unlikely to be major, a Greek Gotcha that appears to be on simmer, a Chinese New Year that has closed their financial markets, also putting on simmer near-term worries of further monetary tightening, and a host of other Street-friendly figures. Meanwhile, momentum traders, speculators, and model-driven players have been buying U.S. dollars, which suggests another change in the trend since stocks rallied right in the face of a stronger dollar. Even more surprising was crude oil’s spurt, as well as gold’s weekly climb, given the “buck’s bounce.” Indeed, counter intuitive as it seems given the greenback’s strength, the strongest sector last week was Basic Materials, which gained an eye-popping 5.02%.
Also of interest, at least to us since we are “long,” is that Japan’s economy expanded at a faster than expected 1.1% in 4Q09. Despite all of the negative nabobs, we continue to like Japan for a multiplicity of reasons. Apparently, so does Byron Wien, vice chairman of Blackstone Advisory Services and former chief market strategist of Pequot Capital and Morgan Stanley. According to Byron, “Japanese stocks will be the best investment among the world’s biggest markets.” He goes on to note, “Everybody who could
sell Japan has sold Japan. Everyone is on one side of the boat.
My view is that we have a pretty good chance of having this one be the best of the major industrial markets. It’s not a boom, but things are getting better.” Obviously we agree and have been recommending tranching into the Japan Equity Fund (JEQ/$5.33) and Japan Smaller capitalisation Fund (JOF/$7.78). As the savvy
folks at the GaveKal organisation opine, if China can change its business model from one of “labour productivity” to one of “capital productivity” (to gain more efficiencies on capital), it is hugely bullish for Japan because Japan does more business with China than it does with the United States.
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