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Wednesday, May 24, 2017


Double Your Money From Japan’s Population Crisis

In over 80 countries including every country in Western Europe, China, Russia, Poland, and Canada, there are now fewer births than required to replace the number of individuals who die each year.

And nowhere is this crisis more critical than in Japan, where due to low birthrates, the country is on course to lose 31% of its population between now and 2060.

This is an unstoppable demographic trend that will have severe consequences on Japan’s economy.

With over one quadrillion yen in debt, the country will soon no longer be able to support its aging retiree population.

In fact, the ratio of workers to retirees is projected to reach 1:1.4 by 2020 – the lowest in the world.

This leaves the Japanese government with only one option… to devalue its currency immediately so that it can jumpstart exports and generate immediate revenue.

And I’ve found a way for you to easily double your money from the yen’s inevitable crash.

The World’s Population is Older Than It’s Ever Been 

The really great thing about following the Unstoppable Trends is that the possibilities are endless, as is the profit potential.

And first on the list of Unstoppable Trends is Demographics. That’s very deliberate. Demographics are the statistical language associated with a given human population – number, gender, age, income, socioeconomic status, buying habits, etc.

If you understand the science, you can accurately predict everything from economic conditions to market direction years – even decades – in advance. Most importantly, though, demographics are an investing “edge” that can give you a way to interpret data that others simply don’t see or understand.

And right now, the markets are missing a crucial demographic fact. You see, 2014 marked a major inflection point. That’s when the number of seniors (65+) passed the number of people in their peak earning years (45-54). You don’t hear a lot about this, but you should.

And while more than 80 countries, including every country in Western Europe, China, Russia, Poland, and Canada, now have fewer births than deaths each year, Japan is worse off than most. In 1995, Japan became a “post-mature” society – meaning that there is a disproportionately large number of older people to a younger population that is not being replenished.

Right now, the country has only 2.8 workers supporting each retiree.

With the birth rate declining fast, things are set to be even worse. Japan had only 981,000 births in 2016 – the lowest on record since WWII. It’s the first time births in the nation will fall below one million since data became available in 1899, and the tenth consecutive annual drop on record.

Meanwhile, Japan’s death rate is more than 1.3 million per year, creating a deficit of nearly 400,000 people. Births, marriages, and fertility rates are all declining. Right now, there are just under 17 million children under the age of 14 – and that number declines by one every 100 seconds, according to researchers at Tohoku University.

One forecast suggests the last-ever Japanese citizen may be born there by 3011.

The country’s population is going to shrink from 127 million today to 86.7 million by 2060 – a 31% decrease that will damn everything from future productivity to their version of Social Security. And not only are things getting worse, they are getting worse at an accelerating rate, as data from this U.N. study makes clear:

One solution to these problems would be for Japan to open up to young workers from abroad, using immigrants to supplement the working-age population. But the country has no immigration policy to offset this demographic hole, and there are no signs that such a policy is coming.

To be clear: Demographics are one of Japan’s biggest problems, but this isn’t a play based on demographics alone. The way to profit based on Japan’s economic muddle is more closely related to even scarier numbers.

That’s because nothing is more graphic than the debt that’s destroying the country…

Japan’s Debt Is Choking Off Any Hopes of a Bright Economic Future

Japan’s government debt to GDP is now at almost 250%. Factor in private debt and corporate debt, and the figure exceeds 650%. The country is now more than one quadrillion yen in debt.

As you can see in the following chart, Japan’s debt is more burdensome any other major economic power. It makes Greece look  positively conservative, while the U.S. national debt ratio of nearly 100% to GDP looks like a monetary speed bump in comparison.

So what can Japan do?

Well, first Japan tried cutting spending as a way to get around this problem. The pork barrel construction projects and bridges to nowhere that garnered international press in the late 1990s and early 2000s are all gone now. It’s unclear what else they can realistically trim. More than 25% of Japan’s population is comprised of retirees, and they vote. So cutting benefits is a political non-starter.

Japan also tried raising the national sales tax in April 2014. Economists told Prime Minister Shinzo Abe that this would help cure the debt problem. And they were right – theoretically.

In reality, it drove the economy into an “unexpected” recession, with GDP tanking by 7.2% in the second quarter of 2014. And with wages already in decline, a repeat will only make things worse.

Next, Japan tried monetizing its debt. This meant having the Bank of Japan buy up so much newly issued Japanese government debt that investors would have to shift their holdings into riskier assets, stimulating the economy.

That, too, was a theoretical exercise.

In reality, the Bank of Japan is already buying more than 70% of newly issued Japanese government bonds to the tune of nearly $70 billion a month. Yields have dropped as planned… All the way to 0.5% on the 10-year note.

That leaves only one viable option…

Reviving Japan’s Exports Will Require a Devalued Yen

With immigration a no-go, and other economic “solutions” failing, the only viable option left for Japan is to devalue the yen. By making Japanese exports cheaper abroad, this would jump start the Japanese export machine – which is crucial to the country’s economy. Japan has no domestic consumption to speak of, which puts its consumers in a pinch.

Again, the nation has to devalue its currency – the yen – to survive. It has no choice. That’s what is creating this opportunity.

The play is a simple yen short – a bet that the yen will fall – based on nothing more sophisticated than demographic analysis.

Now, shorting a currency like the yen can get a little tricky. For example, you could play this by shorting the yen directly, as many currency traders are doing.

But in light of the currency rigging scandal that in late 2014 resulted in a combined $4.25 billion in fines spread between UBS, JPMorgan Chase, Citigroup, HSBC, and the Royal Bank of Scotland, that’s like playing with a loaded gun. Everything currency traders touch is a threat to the integrity of the markets lately.

Or you could head for the Chicago Mercantile Exchange (CME), where futures traders are having a splendid time with the Japanese yen Futures Contract. These involve some 12.5 million yen per contract, with a minimum trade of 150 contracts.

With high risk and high margin requirements, these are not for everybody. Worse, security futures are highly leveraged, which means the amount of money you can lose can exceed the amount you originally deposit with your broker, and is potentially unlimited.

But don’t worry. There’s a much easier way.

The Easy Way to Short the Yen 

The ProShares UltraShort Yen ETF (NYSEArca:YCS) increases by 2% for every 1% fall in the value of the Japanese yen against the U.S. dollar.

It’s the simplest way to short the yen.

YCS is an exchange-traded fund (ETF), which is great because they trade like stocks, generally have lower comparable expense ratios than mutual funds, and can be super liquid. Plus, they’re flexible, and for that reason a great addition to most portfolios.

Way back September 2011, when the yen was trading at approximately ¥77 to the U.S. dollar and highlighted a trade that’s returned more than 100% to date. Now, the exchange rate has lurched all the way to an unthinkable ¥122 per U.S. dollar. But it’s not too late for you to climb aboard. In fact, given Japan’s demographic troubles, the exchange rate could easily hit ¥200 to the dollar in the next two years.

Right now YCS is trading at around $70 per share and has appreciated more than 55% over the past five years. It could double from here.

You see, estimates suggest that to meet its 2% inflation targets, Japan would require at least five years of 15-20% devaluations.

But I think this understates the problem.

My take is that Japan will require more like 10 years of devaluation to effectively break even. And that makes shorting the yen an ideal longterm trade for you.

Now, if you’re one of the investors who believe Japan will come roaring back like Prime Minister Abe has predicted, that’s fabulous. I’m an optimist myself.

That’s a statement I stand by today.


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