From New Frontier Investor (AUS) – Bill called it the ‘Trade of the Decade’. And a darn good trade it turned out to be.
It was in 2000. Bill Bonner, the founder of Port Phillip Publishing’s US parent company, looked at one particular asset back then, deciding that it looked cheap.
As Bill wrote on the matter two years ago:
‘The first time we announced a “Trade of the Decade” was in 2000. US stocks were expensive. Gold was cheap. “Buy gold. Sell US stocks,” was our advice. That worked out well. No major asset class beat gold. US stocks, meanwhile, went up, down and up again…ending the decade about where they started it (not taking into account losses due to inflation).’
It was, as they say, a prescient move. At the beginning of 2000, gold was trading for just US$282 per ounce (AU$438). One year later, the price had fallen further. Perhaps the ‘Trade of the Decade’ wasn’t such a good idea after all. But, as Bill notes, it didn’t stay that way for long. From January 2000 to December 2009, the gold price climbed from US$289 per ounce to US$1,096 per ounce. That’s a gain of 279%. Over the same timeframe, the US S&P 500 index fell 23.4%.
One decade-long trade idea and a 302% outperformance of a major stock index? That’s not bad. But Bill’s first ‘Trade of the Decade’ ended at the end of 2009. Bill is still a believer in gold — as am I (Kris). But in 2010, after going ‘one for one’, Bill decided to call his second ‘Trade of the Decade’. Here’s how he described his rationale for that next trade:
‘In 2010, we looked around again for another trade. Nothing was particularly cheap. But Japanese stocks had been going down for 20 years. What were the odds that they would recover sometime in the next decade? We didn’t know. But compared to other investments, Japanese stocks looked good.’
Bill wasn’t alone in thinking Japanese stocks looked cheap. In February 2010, in my investment advisory service at the time, Australian Wealth Gameplan, I recommended investors buy a Japanese stock ETF that traded on the Aussie market. For the first two or more years of that trade, it looked like a bad move. From January 2010 to late 2012, Japan’s Nikkei 225 index fell 19%. But investing isn’t always about making quick returns. It’s about having the conviction to stick with an idea if you still believe it has merit. Fast forward to today and Bill’s second ‘Trade of the Decade’ is looking pretty good. It’s up 58.7%. That beats the Aussie S&P/ASX 200 index, which is only up 5.5% over the same timeframe. But it’s lagging the US S&P 500 index, which is up 76.5%.
Yet we’re only just over halfway through the decade.
There’s still plenty of time for this trade to play out further. In fact, based on the analysis and research that I and analyst Ken Wangdong have done in recent weeks, we believe one particular Japanese stock could reward investors well in the short term. This isn’t a trade that you necessarily want to hold for a decade, or even until the end of this decade for that matter. As Ken explains below, this is purely a short term opportunity. But it’s one that could present investors with a 60%-plus return over the next 12–24 months. Interested? I’ll hand you over to Ken for more details…