With so much emphasis being placed on the troubles in China, the investment world might be ignoring a bigger problem in Japan.
“Japan is one of the things that keeps me up at night because I can’t see how the fourth largest economic region on the planet could possibly default on its debt and it not have ramifications on the rest of the planet,” said Dennis Mitchell, senior vice president and senior portfolio manager at Sprott Asset Management.
Mitchell, who moved to Sprott three months ago, launched four new funds on Wednesday: Sprott Focused Global Dividend Class, Sprott Focused Global Balanced Class, Sprott Focused U.S. Dividend Class and Sprott Focused U.S. Balanced Class. Don’t expect to see much representation from Japan in the global funds.
“I don’t anticipate making very many direct investments in Japan,” said Mitchell. “Abenomics is doomed to failure. They have some real structural problems that I haven’t seen them make meaningful progress towards.”
While Mitchell expressed concern about Japan, he was much more optimistic about the US.
“The US is the deepest, most high liquid pool of quality businesses on the planet,” said Mitchell. “The US is a place where I’ve got a lot of interest and our US fund, once I put the capital to work will largely be fully invested.”
Mitchell was also bullish on Europe thanks to a massive quantitative easing program, less austerity compared to previous years, the weakness of the euro, low oil prices and more recently the recapitalization of the banking sector, which is improving credit demand. “The Eurozone is blessed with a ton of tailwinds right now,” he said.
However, he sounded notes of caution around the dilution of the Eurozone, with all of its member states compared to the United States, as well as the political turmoil swirling in the region.
“As much as they’ve got a bunch of tailwinds, political risk is the key risk there,” said Mitchell. “Obviously geopolitical risk as we’ve seen in the last few days with Turkey shooting down that Russian jet and the Russians threatening retaliation, cutting off gas shipments to the Ukraine. That’s your big risk and the chance of a huge mistake being made by one political entity.”