Japan Is The 'Anti-Bubble': WisdomTree' Schwartz

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00:00On the year, you've still seen basically flat flows on Japan.

00:04So I think this is one of the opportunities that, hey, it's been an under love segment again.

00:09And that it's, you know, people talk about the AI bubble, quote unquote.

00:13I don't think it's a bubble, but people think about the U.S. markets being expensive.

00:17I think Japan is the anti-bubble.

00:19Like they are, when I look at DXJ, it's got a PE of 14 and a half.

00:23We launched another Japan Opportunities Fund that has all the Buffett stocks.

00:27He's brought more interest in Japan than anybody else.

00:30That OPJ, OPPJ, has a PE of 12 and a half.

00:34So literally half the S&P PE.

00:36They are doing good things for shareholders.

00:39And Takaiichi, if she really does get some of these lower taxes, higher spending,

00:44tries to get the Bank of Japan not to hike as aggressively as people thought,

00:48that could be a very bullish setup for the economy.

00:51And it's a very cheap market.

00:53So it's got a lot of things going for it.

00:55I want to talk about a little bit more how the currency plays into this, though,

00:59just when it comes to Japanese equities overall, and then also how it affects your hedged ETFs as well.

01:05Because the yen has been really hard to keep pulse of.

01:08And there was an interesting quote from Ken Peng, who is head of investment strategy for Asia at Citigroup's wealth management unit,

01:15giving the quote to Bloomberg, that I'm not using the yen as a risk barometer much anymore.

01:20So it feels like the profile of the yen has changed a little bit.

01:24And I wonder if you're seeing that show up in terms of how investors are viewing your currency hedged products.

01:30Well, betting on the yen for the last 13 years has maybe been the single greatest mistake ETF investors have made.

01:39If you look at the unhedged Japan since Abe first came in in 2012, the unhedged Japan funds are up 7.5% a year.

01:46DXJ is up 15% a year, beating the S&P 500.

01:51Tell me how many international funds have beat the S&P 500 for 13 years, which leads to like a 510 versus a 160% return.

02:00So people have been wrong on the yen basically for 13 years.

02:04People have no idea what these currencies are going to do.

02:07You get paid to hedge the yen.

02:09And so I just feel like people have gotten this currency completely wrong for a long time.

02:13And they just bet on the yen too much.

02:15Who knows what these things are going to do?

02:18And, you know, you get paid to hedge.

02:20Like you're getting paid almost 4% today.

02:23This carry from the Fed having higher rates than Japan.

02:26Yes, it's come down from 5% to 6%.

02:28But you're still getting paid to take a risk off the table.