Quote from Cutten:
I agree. Japanese real estate is definitely bargain basement at the moment, and one of my core long-term positions. Out of interest, what J-REITS have you selected, or have you just bought a basket of them?
Here are a few more areas I see value:
German Real Estate, especially Berlin. Land values are very low compared to other G7 countries and capitals. Land prices fell throughout the 90s. I went out there a while ago to look through records and investigate. I found a plot of land selling for 60,000 Euros, that in 1997 had sold for 225,000 Euros - a near 75% fall. And Berlin in 1997 was not exactly a gigantic real estate bubble. This pattern was repeated across many plots. IMO the real estate there is even cheaper than Japan. Prices per square foot there are cheaper than they are in Prague. Mortgage lending standards are very conservative there, deposits of 30%+ are the norm. Also, with the current global subprime worries and real estate bearishness, this sector is overlooked.
Agriculture: there are less values now that the bull market is clearly underway. However, the fundamentals are very strong and prices are not yet discounting the potential. ADM for example is on a very low P/E. It is somewhat reminiscent of homebuilders in the early 2000s, where they sold dirt cheap for years despite being in a raging bull market for their underlying product. Each year they would go up, but the earnings would keep pace and so the multiples remained cheap.
Japanese equities: on most valuation measures such as price to book, these are amongst the cheapest equities in developed the world. There was a 13 year bear market from 1990 to 2003 which scarred an entire generation of equity investors. The Nikkei is off significantly from its 2007 highs on the global credit woes, yet the domestic economy has no property bubble (quite the opposite), no systemic credit crunch, and is unlikely to see more than a brief slowdown (exporters and banks may get hit, but the domestic economy is fine).
US dollar: this is more controversial, but on a PPP basis the US dollar is pretty darn cheap. It is held down right now thanks to the easy Fed policy and subprime/recession concerns, but once that passes, I think there is scope for a large revaluation back to levels more in line with purchasing power partiy.
