It's Official: 'Abe's Revenge' Will Continue

It's official: 'Abe's revenge' will continue... Why Japan won't end its 'easy money' policies anytime soon... Sjug's correction could already be here... Don't miss this week's 'Chart of the Moment'... Last call: Your special Crypto Capital offer ends tonight...

It's official: 'Abe's revenge' will continue...

Japanese stocks jumped to a new 20-year high this week. The benchmark Nikkei 225 is now up 11% for the year – and 7% this month alone – through Tuesday's close.

The latest rally follows the results of the country's general election, which all but guaranteed Prime Minister Shinzo Abe's re-election next year. Clearly, the market was happy... and for good reason. As the Wall Street Journal reported...

Mr. Abe's Liberal Democratic Party and its coalition partner retained a two-thirds majority following a lower-house election on Sunday. The victory for Mr. Abe, 63 years old, puts him on course to become the longest-serving Japanese prime minister. In turn, investors are relieved that his government's policy mix of loose monetary policy and corporate governance reform is likely to continue.

"The result is fundamentally positive for the equity market," said Shusuke Yamada, chief Japan FX and equity strategist at Bank of America Merrill Lynch. "Political stability should be restored and Abe's economic policy will likely continue."

This news follows a statement earlier this month from Bank of Japan ("BoJ") Governor Haruhiko Kuroda, reaffirming that while price inflation remains well below 1% today, the country's central bank remains committed to reaching its 2% target.

In other words, even as the Federal Reserve and other major central banks are talking about tightening monetary policy, Japan intends to keep the "easy money" flowing... just as our colleague Steve Sjuggerud has predicted.

As longtime readers may recall, Steve coined the term 'Abes's revenge' nearly five years ago...

At the time, Abe had just been elected to lead Japan... for the second time.

You see, Abe had previously been prime minister in the mid-2000s. But his first term did not end well... In 2006, he supported the BoJ when it began raising interest rates. Those moves led to a big decline in Japanese stocks, a big rally in Japan's currency (the yen), and pushed the Japanese economy back into deflation. The unpopular Abe eventually resigned in September 2007, just before the global financial crisis took hold and amplified those moves.

But in late 2012, Abe ran for re-election... and won. How? By promising not to make the same "mistakes" again. As Steve explained in the January 2013 issue of True Wealth...

Shinzo Abe is about to get his revenge... big time. And if you play your cards right, you could make A LOT of money from it...

This week, he swept Japan's elections – with a two-thirds majority! Abe won by promising to not repeat the same mistakes he made in 2006. In fact, he promises to do the exact opposite...

He wants to do what Federal Reserve Chairman Ben Bernanke is doing in the U.S. – multiplied by 10. (Bernanke has cut interest rates to zero – and has been printing money. Bernanke is fueling the "Bernanke Asset Bubble," which has the potential to be the greatest asset bubble in history. It could drive U.S. stocks and real estate to new, unheard-of heights.)

Unlike in the U.S., Abe is not trying to hide what he's doing. Abe is straight-up about creating inflation and causing the currency to fall... "We have got to get the economy out of deflation, correct the strong yen, [and more]," he said this week, "That's our mission."

As Steve explained, the promises he made were frankly a little crazy. And they weren't certain to actually help the Japanese economy. But Steve was sure they would have a dramatic effect on Japanese markets. More from that issue...

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...

Abe is dead-set on creating a "Bernanke Asset Bubble on steroids" in Japan. He will force Japanese people into stocks by cutting interest rates and printing money.

Steve was exactly right...

Japanese stocks soared following his recommendation... The Nikkei rose more than 100% in less than a year and a half. The yen lost more than 30% of its value over that time. And price inflation rose to nearly 4% by early 2014.

But just as Steve suspected, the effects on the Japanese economy were fleeting. Inflation began moving lower again. By last fall, government officials were getting worried that Japan was sliding back into deflation.

So what did they do? Japan "doubled down" on these policies. As Steve explained in to True Wealth subscribers in December 2016, nearly four years to the day of his first recommendation...

Kuroda just gave us the "green light" to make big money in 2017.

He's worried about Japan's economy. He's worried it's slipping back into deflation. And he's not going to sit by and let that happen.

Instead, he'll do "whatever it takes" to get Japan's economy growing again. And he's got a lot of ammo in his bazooka...

Interest rates are already negative in Japan. But they certainly won't be going higher. The Japanese government is also actively buying Japanese stocks – in unprecedented amounts. And it has nearly guaranteed more money printing.

We've seen this play out before... It happened in Japan back in 2013. So the end result isn't hard to figure out: 1) Japan's currency, the yen, will fall... a lot. 2) Japanese stocks will rise... a lot.

It's already happening.

Once again, Steve has been exactly right so far...

He recommended buying shares of the WisdomTree Japan Hedged Equity Fund (DXJ). This fund is designed to capture the upside in Japanese stocks, while also avoiding the downside in Japan's currency. And that's exactly what it's doing...

True Wealth subscribers are up more than 24% in less than a year so far, compared with the Nikkei index's 22% rise over the same period.

But Steve remains bullish on Japanese stocks and still considers DXJ a "buy" today. And if this week's news is any indication, there's still plenty of upside ahead.

Well, that didn't take long...

Speaking of Steve's timely calls, it appears he may soon be able to add one more to the list.

If you read yesterday's Digest, you know Steve just warned readers to prepare for a stock market correction. And one day later, there are signs it may have already started...

All three major U.S. indexes reversed lower today. And the CBOE Volatility Index ("VIX") – the market's so-called "fear gauge" – jumped as much as 15% to its highest level in a month.

Of course, these are still relatively small moves. And we simply can't know in advance if this is the start of a long-overdue pullback. But no one has had a better "feel" for this long bull market than Steve, so we wouldn't bet against it.

We should also note that Steve isn't alone...

Our colleague Greg Diamond – analyst for the Stansberry NewsWire team – also believes a correction is likely.

Greg is a chartered market technician ("CMT") – a professional "chart reader," if you will – and he's identified a rare extreme that has never failed to predict a significant market pullback over the past 100 years.

You don't want to miss this week's "Chart of the Moment" below.

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New 52-week highs (as of 10/24/17): AllianceBernstein (AB), AMETEK (AME), American Express (AXP), Boeing (BA), Berkshire Hathaway (BRK-B), Cisco (CSCO), WisdomTree Japan Hedged Equity Fund (DXJ), WisdomTree Japan Hedged SmallCap Equity Fund (DXJS), iShares MSCI Japan Fund (EWJ), Intel (INTC), iShares U.S. Home Construction Fund (ITB), JPMorgan Chase (JPM), Microsoft (MSFT), Nvidia (NVDA), Overstock (OSTK), PNC Financial Warrants (PNC-WT), iShares MSCI India Small-Cap Fund (SMIN), Steel Dynamics (STLD), Stanley Black & Decker (SWK), ProShares Ultra Financials Fund (UYG), and VF Corp. (VFC).

In today's mailbag, a plea for reason... and a "prophecy" on North Korea. What's on your mind? Let us know at feedback@stansberryresearch.com.

"I read all the stuff you guys write about – from Porter, Sjuggerud, Doc, etc. You provide competing views on economics and finance which has served me well. However, when you step into politics I hate it. I don't know much despite my years of education and like most I have my own opinions and am happy to let others have theirs. Live and let Live. I am tired of the mental masturbation by the hysterical set including the professional talking heads and their closed-minded followers of all persuasions. We are here to learn, open our minds, be civil, and not engage in hate mongering. I greatly appreciate Porter's Soros piece and Sjuggerud's Gold not Crypto and warning about complacency. I appreciate your attempts at the lessons but I could do without the political hysteria from my fellow subscribers, we have enough of that already." – Paid-up subscriber Rana K.

"Please allow me this opportunity to inform you of what I read (between the lines) in Scripture. Reading there I perceived the following: 'There will be a nuclear war ON THE KOREAN PENINSULA!!! When is the question, but it sure appears that this thing is not so far off at this point. So you can stop speculating on that account." – Paid-up subscriber Clarence G.

Regards,

Justin Brill
Baltimore, Maryland
October 25, 2017