A while back I wrote that everybody believes in HBD because it’s impossible for those of us who believe in HBD to make money from our beliefs.
Houses in safe neighborhood with good schools (i.e. in areas with lots of white people) are more expensive than houses in crappy neighborhoods, for example. People may hate what John Derbyshire says, but they spend their money as if they believe every word of it and then some.
I have only come up with one exception to my theory – invest in Japan.
By all actual measure of credit quality, Japan is in a world of hurt. They have more debt than crappy Mediterranean countries, for example. In short, if any country has debt problems, it’s Japan – at least by all objective financial measures.
Lots of people – most notably Kyle Bass – have been betting heavily against Japan. It hasn’t been going well for him.
I think the reason is that the Japanese are not like the Italians, the Greeks or the Spaniards. If they need to suck it up to pay off their debts, the Japanese will do so. They’ll do it quietly, efficiently and without too much complaining. They are a nation in the way that few remaining countries are a nation. And they’re smart.
So, I would argue that this is one case where there might be some room to make some money from your beliefs. Japan won’t default. At least that’s my guess.
Place your bets at your own risk.