The Reason Why Warren Buffett Made Large-Scale Investments in Japan
Warren Buffett may be retired now, but until recently, he appeared on TV saying he views the Japanese economy brightly.
He said Japanese companies will grow even more.
True to his reputation as the "Oracle of Omaha," the Japanese stock market continued to soar, making everyone exclaim, "As expected of Warren Buffett!"
However, I later found out that he didn't invest in growth drivers like Japanese industrial technology stocks,
but rather in Japanese general trading companies (Sogo Shosha).
Japanese general trading companies do everything that makes money—energy, raw materials, food, real estate, etc.
You can think of them as doing everything that is profitable.
What Buffett saw was that these Japanese trading companies hold many overseas assets and are excellent at "cash businesses."
Buffett, who loves companies with good cash flow, had his eyes on these undervalued Japanese trading companies,
and he began investing. Even this was done by utilizing the weak yen for exchange gains—
by issuing large-scale bonds through the Bank of Japan to buy up stocks.
He used currency speculation via the weak yen and bond issuance to accumulate shares in Japanese general trading companies.
He secured massive profits by utilizing the exchange gains from the weak yen.
I truly believe Buffett is an incarnation of money, absolutely obsessed with profit.
Buffett focused strictly on Japan's five major general trading companies: Mitsubishi, Mitsui, Itochu, Marubeni, and Sumitomo.
Japanese general trading companies deal in "profitable real assets" worldwide, such as energy, raw materials, food, and real estate.
He doesn't use his own money: 'Currency Leverage' utilizing the weak yen and ultra-low interest rates.
The most chilling part is the method he used to raise investment funds.
Buffett did not exchange US dollars into Japanese yen to buy stocks.
Instead, he raised funds by issuing large-scale yen-denominated bonds (Samurai bonds) locally in Japan.
[Buffett's Risk-Free Profit Formula]
Borrow yen at Japan's lowest interest rates (via bond issuance)
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Use that money to purchase Japanese trading company stocks with 4–5% dividend yields
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Use the 'dividends' from the trading companies to pay off the bond 'interest,' leaving massive amounts of cash remaining
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As the value of the yen drops (weak yen), the principal burden for Buffett, who holds dollars, decreases even further
A double jackpot of weak yen exchange gains and skyrocketing stock prices
According to reports from Fortune and others, Buffett's investment in these Japanese general trading companies is estimated to have brought a massive profit of as much as $24 billion (over 30 trillion KRW) to Berkshire Hathaway.
The conclusion is that Warren Buffett's talk about the Japanese economy was a total lie. He is a ruthless incarnation of money who made a fortune without spending a single cent of his own, simply by using exchange gains from the weak yen.
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