The bearish Japan group is gaining more popularity. Richard Perry shared his views on Japan while speaking on the Global Stage panel at the Delivering Alpha conference. Perry said that he has been short Japanese corporate bonds for a while now, and made a big statement by likening Japanese corporate bonds to U.S. subprime bonds that were bought during the 2006-2008 period when the instruments were on the verge of collapse. He also said that buying Japanese corporate bonds in these times is like being bullish on European sovereign credit in 2008-2010.
While talking about Japan’s current economic problems, he said, “Japan is a country on incredible people, incredible food, culture etc,…but they have really screwed up their economy.”
Watch Richard Perry’s CNBC Delivering Alpha interview here.
Japan Corporate Sector Debt Overvalued
Perry said that Japan has lost the major edge it had in the engineering sector and has allowed Germany and the U.S. to become close competitors. In some cases, German and American companies have more advantage over Japan’s showcase sector. Others who have been shorting Japanese equities include Cliff Asness’ AQR Capital, Davidson Kempner, Lansdowne Partners, Oxford Asset Management and Steve Kuhn’s Pine River Capital. Coincidentally Kuhn is also scheduled to speak in the Delivering Alpha’s Asset Bubbles panel in evening.
He said people who are buying the corporate debt are relying heavily on rating agencies who are not assessing the correct valuation of these assets. It makes no sense that the same company’s equity has gone down in the past years but its debt remains highly valued. He also said that the Japanese bailout cannot help in this case. Perry has been short Japanese corporate debt and equities for 12-18 months now.
Richard Perry on China and Europe
On the other major Asian economy, China, Perry said that the new Chinese government has established a different form of capitalism and that growth and strength in China will strengthen the world economy. Perry said he did not want to discuss his Chinese investments as they were ‘controversial’.
On the subject of Europe, he said that recovery in the zone is probably two or three years behind the recovery in the U.S. While talking about Greece, he said the country has done well to rebalance itself and will stay in the European Union. Perry is long on Greek government bonds, like many other hedge fund managers including Dan Loeb and Seth Klarman. He also said that Spain is on a good road, and he compared recovery in Spain to the strengthening of Florida’s economy.
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