market folly

Vitaliy Katsenelson of Investment Management Associates is back with another compelling presentation on a foreign country. Last time around, he examined how China was the mother of all black swans. Katsenelson provides his thoughts at ContrarianEdge.com and this time around he's focused on Japan and how it is past the point of no return.

Embedded below is the entire slide-deck on Japan:



You can directly download a .pdf of the presentation here.

His presentation focuses on one fact that's been known for a while: the Japanese savings rate is declining as their population ages. But, the main thing to take away from that is that the Japanese will become net sellers of bonds and this has consequences. In order to fight off the yen's depreciation against the dollar, Japan will have to sell some of their dollar reserves. That's a much bigger deal than it sounds when you consider that Japan is the largest holder of US treasuries. While the US isn't in great shape right now, we're in better shape than Japan comparatively speaking. Conclusively, Katsenelson argues that the US economy should work things out naturally rather than relying on continuous stimulus spending so we don't end up like Japan.

Now that you've taken a look at Japan, make sure to check out Vitaliy's other presentation, China: The Mother of All Black Swans. Additionally, we've also detailed global macro hedge fund Woodbine Capital's focus on the dispersion between the industrialized and emerging worlds, a piece well worth the read as well.