1. http://www.investmentcontrarians.com/stock-market/how-you-can-profit-
from-the-currency-wars/1263/
How You Can Profit from the Currency
Wars
By Sasha Cekerevac for Investment Contrarians | Jan 18, 2013
Recently, we have heard a lot about currency wars being waged by various nations
around the world. To those who are unfamiliar, “currency war” is a term that refers to
countries that are actively looking to devalue their currency to help stimulate export
growth and their domestic economy.
Investing in stocks in this type of environment can be tricky, as one needs to add
additional variables to the analysis. Having a strong market sector, solid long-term
fundamentals of the individual stock, and a favorable currency direction can help when
considering investing in stocks.
While many look to the Federal Reserve as being the most active in trying to devalue the
U.S. dollar, I would point to Japan. Newly elected Japanese Prime Minister Abe has been
vocal about demanding massive and unprecedented monetary stimulus by the Bank of
Japan to help stimulate the Japanese economy.
Large institutions interested in investing in stocks certainly have jumped on the export-
oriented market sector, as Japanese stocks are up approximately 24% since mid-
November, when elections were announced, and the yen is down in value by
approximately 10%.
However, this is not a short-term phenomenon. I believe the yen will continue to remain
weak for a long time, and this will benefit the Japanese export market sector. Those

2. http://www.investmentcontrarians.com/stock-market/how-you-can-profit-
from-the-currency-wars/1263/
interested in investing in stocks could look to equities in Japan that will benefit from the
yen’s devaluation.
One market sector that also has strong fundamentals in the U.S. is vehicle sales. The U.S.
had extremely strong car sales in 2012, and I expect 2013 to be just as strong. When
combined with a further lowering of the Japanese currency, this will further help the
Japanese automotive market sector.
Investing in stocks in the automotive market sector is slightly more difficult because of
the economic problems in Europe. The market sector itself will continue to remain
sluggish on the European continent, and this makes analysis that much more difficult.
Having said that, two examples of recent strength in the automotive market sector from
the currency devaluation of the Japanese yen are Toyota Motor Corporation (NYSE/TM)
and Honda Motor Co., Ltd. (NYSE/HMC).

3. Chart courtesy of www.StockCharts.com
Timing is very important when investing in stocks. During the drop from 2007 to 2009,
very few people were comfortable accumulating shares after such a dramatic drop, which
is unfortunate, as that was a great buying opportunity. Investing in stocks when others are
selling can be quite profitable over the long term.
We can see two distinct long-term trendlines on the 10-year chart above. From the lows
of 2003–2007, the long-term uptrend was broken, and the shares declined dramatically.
With the automotive market sector having been in serious decline during the Great
Recession, this made perfect sense. However, 2012 was an extremely strong year for car
sales in the U.S. and subsequently we have just seen the stock break up through its long-
term downtrend.
In addition to strong car sales in America, the lower Japanese yen is that much more
advantageous to the automotive market sector in Japan.
One danger when it comes to investing in stocks is rushing into a market sector following
a significant move. Toyota is already up approximately 25% over the past couple of
months, a substantial move for a company of its size.
I think we’re likely to see some profit-taking in both the Japanese automotive market
sector and the Japanese currency. Nothing moves in a straight line.
However, I do believe the Japanese yen will continue to weaken versus the U.S. dollar for
an extended period of time. The U.S. Federal Reserve is much closer to ending its
monetary stimulus versus the Japanese central bank, which is just now embarking on a
new money-printing regime.
This type of move can last for years. The Japanese yen weakened from approximately 78
per U.S. dollar in October 2012 to approximately 90 in early January. That is a
substantial move in a very short period of time. Having said that, over the next couple of
years, I can certainly see the Japanese yen weakening past 110 to the U.S. dollar.
Combined with a low interest rate environment in America for the near future, the
Japanese automotive market sector should have strong fundamentals as a wind at their
back.
Investing in stocks is never easy, and I would not recommend buying this market sector
currently, as the move appears to be overextended. However, I do suggest adding it to
one’s watch list and looking for opportunistic entry points over the next year or two.
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