The Wall Street Journal published an
article this morning titled 'Earthquake Points to Fallibility of
Forecasts' - reading time 1 minute. The important
message in the article is not that "no one can forecast an unexpected
event", which the article says and which is of course true. The
more important issue raised by this article is one I have been thinking
about ever since I first learned of the Japanese earthquake yesterday.
The Japanese economy is an important one on the world stage
(being the 3rd largest world economy), and the rehabilitation
cost that will be required in the earthquake's aftermath (with another
major earthquake announced this morning perhaps making things worse)
will be enormous - in circumstances where Japan's public debt apparently
is approximately two times its GDP. One of the things I
think will be worth watching is which countries contribute to whatever
re-building fund its required. In particular, given what I
understand from my readings to be a long-term underlying antagonism
between China and Japan, whether China will be a contributor to Japan's
rehabilitation efforts.
The big question as I see it is: What
near and long term effect(s) will this event have on the Japanese
economy going forward, and what possible effect(s) will this event have
on the rather fragile developed countries economies? The
WSJ article says the same thing this way: "Until the full
extent of damage is known, uncertainty will be the key word for the
Japanese outlook and perhaps the global one as well". It
seems to me this is becoming a bigger and bigger question almost by the
minute, given the currently (as I write this at 10:15 ET on Saturday,
March 12) evolving issues around the possible nuclear reactor
meltdown(s) that have resulted in the earthquake's aftermath. As
an aside, while it is too early to know the outcome of this particular
issue, under any circumstance it seems to me this 'nuclear event' will
lead to much dialogue around nuclear power when things settle down -
irrespective of its outcome.
I suggest it behooves all investors in
equities, physical gold, physical silver, and the money markets to
closely monitor the evolving Japanese situation in the context of its
possible effect on:
· the world economy and economies of
individual countries - not the least of which is the Japanese economy;
· the equity and money markets; and,
· the precious metal markets.
You might also want to
read 'Quake Aftershocks Could Hit Markets
Days Later' - reading time 1 minute, 'Will The Japanese Earthquake Be The
Straw That Breaks Europe's Back?' - reading time 1 minute, and in
particular 'Has The Tsunami In Japan Destroyed The
Japanese Economy' - reading time 4 minutes.