The 80/20 rule tells us that 20% of your customers – the VIPs – accounts for 80% of your revenues. It is derived from a fundamental law – the Pareto Law – driving ecosystems towards a stable and efficient form of self-organization.
In 2000, developed countries accounted for 70% of world GDP and 80% of world GDP growth. In 2021, developed countries produced only 53% of the world's wealth, and less than 20% of world GDP growth.
The economic and political world is undergoing a transition phase, which destabilizes the Pareto distribution. Yesterday's VIPs may not be tomorrow's.
In this reconfiguration, Japan is a pivot country in need of scrutiny. Japan is at a geopolitical crossroad, which could lead it East or West, as shown in the newfound volatility of its currency (the worst performing one among main currencies this year) and its stock market (the best performing one).
The Japanese yen is a mystery.
Much like Japan, in fact, the sole region in the world (in our macroeconomic partition) that is both a country and major economic center on its own.
The Japanese yen exhibits two unconventional properties:
Why? And how do we trade the mysterious yen?
In times of great market uncertainty, like today, investors should seek sanctuary in the stocks of companies that are cheap, enjoy positive cash flows, have plenty of cash on their books, and which are quoted in an undervalued currency. Today, Charles writes, the shares of non-financial companies in Japan fit the bill on all four counts.