The Debt Crisis Everyone is Ignoring

Are We About to Hit America's Final Unwind? America is heading towards an unprecedented economic crisis … and no one is talking about it. On December 23, 2013, a financial event is coming that could wipe out markets overnight. To find out how you can shelter yourself from this coming storm, click here for our urgent video report. Profiting From the Other Debt Crisis By Jeff Opdyke, Editor of The Sovereign Individual Dear Sovereign Investor Subscriber, I want Japan to work. I mean, I really want Japan to work. On paper, it has so much potential as an investment. In practice, it keeps proving over and over again that it's a disaster. Everyone who has ever called the turn in Japan has been wrong. I made that call myself in January 2011 … only to see an earthquake, tsunami and nuclear catastrophe wreck my case for a weaker yen and a stronger market for Japan's export-oriented stocks. With all the focus on Europe and its debt dilemma, no one is paying much attention to the island nation these days. But you should. Here's why … Advertisement Get the hell out of the dollar NOW! The dollar is in the midst of a 'sucker rally'… And if you get paid in dollars and hold the majority of your assets in U.S. stocks or bonds, then you're wealth is in significant danger. This brief message may infuriate you... but as you'll see – I've found a solution that could get you through it all. Just go here for full details. Japan: An Accident Waiting to Happen The world's largest debt bomb isn't Greece or Spain. It's Japan, where government debt now approaches 220% of gross domestic product. See larger image That level of spending makes profligate congressmen in America look downright parsimonious with taxpayer cash. Servicing Japan's debt now consumes some 43% of government revenue, up from about 4% in the early 1970s. It's a situation that's clearly not sustainable. In theory, that much debt – and all the money the Bank of Japan keeps printing to keep the country afloat – should have destroyed the yen by now. Yet, it hasn't. And the reason it hasn't comes down to the country's savings pattern. Japan is able to run huge deficits and sustain such high debt-to-GDP because it has used its vast savings over the last 50 years to fund government spending. I recently talked to my colleague, Evaldo Albuquerque, to get his thoughts. Evaldo is one of the smartest analysts I know. He made a name for himself in foreign currencies, but we're teaming up to find unique, safe income plays. Here's his take: "The yen hasn't collapsed yet because Japanese financial institutions hold 93% of government debt. In other words, domestic investors have financed the government's spending for the past two decades. The problem is Japan has the world's fastest-growing population of seniors aged 65 years and older. "Once all these seniors retire, they will no longer be saving. Instead, they will be cashing out their retirement accounts. The Japanese government will have to find other investors to buy their bonds. Who will buy Japanese bonds paying less than 1%? International investors will certainly require a higher rate, increasing interest expenses. The government simply can't afford that." In other words, the country's savings rate will soon go negative. And that's going to be the tipping point for the currency. For years now, Japan has been printing money and buying government debt to keep interest rates from skyrocketing. But once the savings rate turns negative, Japan's government will no longer have domestic cash to rely on. So, they'll do what every government does when faced with making impossibly hard decisions … they'll turn on the printing presses and crank out boatloads of yen. And the yen will finally crack. If it's a managed devaluation of the yen, as I expect, Japan's export-dependent companies will be big, big beneficiaries. That's because the sales that Japanese companies accumulate in dollars, euros, pounds and yuan will translate into more and more yen as the Japanese currency weakens. That's essentially free profits because, aside from some tax obligations, currency gains have no associated costs on a corporate income statement. The Best Way to Play a Weaker Yen The way to play improving corporate profits in Japan is by finding the companies that are Japanese in name, but whose profits come largely from overseas. One I particularly like is Makita Corp., which trades as an ADR in the U.S. under symbol MKTAY. The company is a globally known brand name in power tools. (In fact, just before Hurricane Isaac slammed my hometown last week, I was using a Makita reciprocating saw to cut away a portion of a neighbor's fence that was blocking my drainage.) Roughly 82% of Makita's sales occur outside of Japan. More than a quarter comes from other Asian markets – especially China – as well as Latin America and other emerging nations. That makes Makita a play on fast-growing markets where demand for housing is diving growth in power-tool sales. Since peaking in mid-2011, Makita's shares have declined about 30%. The stock has not only suffered from the strong yen we've seen in recent years, it's also struggling because of the ongoing recession in Europe, which accounts for 41% of sales. But as I keep saying, Europe's debt woes are temporary … and likewise with the yen's current strength. Once Europe's economy improves, and once the yen cracks – and both are assured – Makita's earnings will pop. The current share price, then, is effectively a big blinking buy sign. The company has a debt-free balance sheet and solid finances. The shares are a buy to $36. But, because it has proven such a challenge to bet on the yen weakening, use a 25% stop loss on this one (meaning tell your broker to sell the shares if they hit $25.70, a 25% decline from the current price of $34.25). The yen's day of reckoning is coming. Buying a financially stable, export-dependent Japanese company like Makita is the way to profit when the reckoning arrives. Until next time, stay Sovereign… Jeff D. Opdyke P.S. Just as Makita and other Japanese companies are finding big success beyond their homes, so too are a rising group of U.S. companies. These are exactly the companies I'm seeking out for my Global Growth Strategist subscribers – companies looking outside of America's borders to tap into emerging market growth and find big profits. Right now, I'm looking at one company in particular that looks ready to go on a historic rise. To read more about what I've discovered, click here. Related Reading: Why a Bet on Zynga Could Have You Hitting the Jackpot What to Own as Silver Gets Ready to Rally Finding Explosive Growth in Tomorrow's Multinationals Why the Wealthy Are Running From America RECENT ARTICLES 9/03/2012 Why America is Losing the Battle for Business Fewer U.S. immigrants are starting small businesses because of the red tape the U.S. has with it's E-2 Investor Visa program. 8/31/2012 How to Find the Most Promising Takeover Targets One of the quickest ways to make big gains through the markets is by investing in poetential takeover targets, such as baby multinationals. 8/30/2012 To Hell with Politicians: Write Your Own Platform Politicans are stealing your rights. So protect yourself by moving your assets offshore and applying for offshore residence. Create a Plan B 8/29/2012 Why a Bet on Zynga Could Have You Hitting the Jackpot Zynga, the social-gaming firm, is entering mobile gambling. If that happens, investing in this baby multinational could give you profits. 8/28/2012 What to Own as Silver Gets Ready to Rally As the price of silver heads higher, make sure you own physical silver, silver bars, silver coins, and avoid paper silver and silver etfs. STATE OF OUR WORLD National Debt Clock: $15,999,461,489,037 BECOME A MEMBER For more valuable information from The Sovereign Society on how to protect and grow your wealth, become a member today. JOIN NOW SPECIAL REPORTS Jeff Opdyke 2012: The Year of Yield Andy Hecht Metals More Precious and Profitable than Gold Bob Bauman How to Escape America, and Where to Go STAY INFORMED Whitelist Us Follow Us on Twitter Like Us on Facebook   Privacy Policy The Sovereign Investor 98 S.E. 6th Ave, Suite 2 Delray Beach, FL 33483 The mailbox associated with this email address is not monitored, so please do not reply. 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