Land of the Falling Yen: Japan Cheers Sliding Currency
CNBC "On-Air Stocks" Editor
The Nikkei, Japan's stock benchmark, posted its biggest daily gain in nearly two years. The index moved up 3.8 percent to close at its highest level since October 2008.
The reason behind this move is easy to explain: the yen is nosediving.
A 3.8 percent move is huge. For the sake of context, that would be equivalent to the Dow moving 500 points...in a single day.
The immediate news is that Bank of Japan Governor Masaaki Shirakawa will leave his position earlier than planned. The yen plunged to a 33-month low on hopes Shirakawa's replacement will speed up aggressive monetary easing.
The weaker yen is certainly helping Japanese companies. Toyota and Mitsubishi Heavy Machinery both hadbullish commentary recently.
Several ETFs have seen greatly increased inflows off the Japanese stock/yen play: the big winner has been WisdomTree Japan Hedged Equity, which invests in Japanese stocks buy hedges against the weak yen--huge inflows since December.
The CurrencyShares Japanese Yen — a play on the dollar/yen exchange rate — have also seen increased flows, although much of that is like money flowing out of the fund as the yen sinks.
1) They're back: another famous name goes public...again. Remember Boise Cascade? In 2004 they went private through Madison Dearborn, and now they're back. They just priced 11.8 million shares at $21, above range of $18-$20. The company is even using the old symbol: BCC. Think vertically integrated wood and construction products, along with plywood.
Why now, you might ask? It's simple: this is another play on the new housing market business, which has been red hot lately. Take Realogy , which is a basket of real estate companies like Better Homes and Gardens, Century 21, ERA, Coldwell Banker. Realogy priced at $27 in October and never looked back: it closed at $44.86 on Tuesday.
2) Gee thanks: Several authors at the London Business School predict that worldwide real returns for stocks will average three to four percent for the next 20 to 30 years, and only one percent for bonds. Since 1950, that compares to about seven percent returns for stocks, and less than four percent for bonds.