U.S. tech stocks recently had their largest inflows in 38 weeks, as I wrote on Tuesday.
To me, that’s a sign that my “Melt Up” thesis is in full swing – that investors finally love stocks. We could see incredible gains over the next 12 to 18 months… And you want to be in on it.
To find the bottom, I don’t want to see record inflows from investors. I want to see record outflows.
Record outflows are a great sign to me that an investment is hated.
Then I want to wait for the start of an uptrend. That’s my basic recipe for finding a great long-term investment…
Last week – the same week that U.S. tech-stock funds attracted more than a billion dollars – Reuters reported some crazy news about Japanese stock flows.
“Japanese equities suffered their largest weekly outflows on record, losing $4.4 billion, with 86% of this related to redemptions from exchange-traded funds,” Reuters said.
The article attempted to explain why the outflows happened:
Japan’s Nikkei 225 [Index] has posted its longest daily winning streak in over 50 years, advancing more than 5% over the last 14 days on hopes that Japanese Prime Minister Shinzo Abe’s ruling coalition will win a national election on October 22. However, the market is prone to profit-taking before elections…
Investors were taking profits before the election results.
They all got out… And that gives us an opportunity. You see, Abe won the election this week…
In December 2012, I called Japanese stocks “The Number One Opportunity of 2013: Abe’s Revenge.” It was the headline in my True Wealth newsletter.
Back then, Abe had recently returned to office – back for “revenge” – after resigning in 2007. Abe made his comeback by promising to undo the mistakes he made in 2006, when he backed Japan’s central bank in raising interest rates.
His new goal? To create massive inflation, and break Japan out of its long struggle with deflation for good.
As I explained in 2012…
I expect Abe’s revenge will create a massive bubble in Japan’s stock market, and trigger a potentially significant fall in Japan’s currency…
The very best way to take advantage of Abe’s revenge is through the WisdomTree Japan Hedged Equity Fund (DXJ) – which takes out currency movements, and gives us direct exposure to an index of Japanese stocks.
That turned out to be exactly right… Shares of DXJ went from around $33 near the end of 2012 to around $50 at the end of 2013 – more than a 50% gain! (Our subscribers pocketed 62% gains on this trade, as we held it longer.)
Now, we have the same setup conditions…
Abe was just re-elected. He will follow the same blueprint. We can expect the same outcome – higher stock prices, and a lower currency value.
My True Wealth subscribers are back in this trade… And they’re already up 24% in less than a year.
Meanwhile, nobody else is interested… The shares outstanding of DXJ are at four-year lows. It’s exactly what I like to see.
With the re-election of Abe ensuring higher stock prices and a weaker yen… with Japanese stocks hated by investors today… and with the uptrend in place… you haven’t missed it yet.
Japanese stocks are hated and in an uptrend. We’re in! What about you?
Good investing,
Steve
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Source: Daily Wealth