No money down, borrow 100% in yen at a 0.50% interest rate to buy $5 Billion of stock paying an 8.00% dividend. Plus the stock more than doubled. An infinite investment return.
intercst
5 Likes
I heard an interview with Charlie Munger who said making the investments was actually extremely difficult, and required someone as smart as Warren Buffett.
I had Perplexity summarize the video:
The video explains Warren Buffett’s investment strategy in Japanese trading houses, highlighting why it was considered a “no-brainer” move. Buffett invested $5 billion in five major Japanese trading companies, which were offering an 8% dividend yield and were seen as undervalued, especially since the Japanese stock market had stagnated for decades.
He financed the entire investment by borrowing in yen at a very low interest rate of 0.5%. This meant his dividend income from the investments was 16 times higher than his interest payments, allowing him to make substantial profits with essentially no equity—immediately earning between 7% and 12% on the $5 billion, or about $350–400 million annually, with minimal risk.
Over the next three to four years, the share prices of these trading companies doubled, turning Buffett’s $5 billion investment into $10 billion. Since he had little to no equity invested, his return on investment was effectively infinite, showcasing the power of combining value investing with strategic use of low-interest debt and currency arbitrage
6 Likes
I do like and appreciate the ability to summarize videos, although in this case I didn’t mind watching all 93 seconds of it.
Pete
3 Likes
This sounds like one of those “too good to be true” things that Warren Buffett warned us against.
2 Likes
My take was the converse: this sounds like something few investors apart from Buffett could pull off, not just because of his business acumen but also because of his already huge cash and stock reserves.
Pete
1 Like