March 22, 2011
Bob Veres is the editor and publisher of Inside Information, a publication focused on practice management and related issues for the financial planning profession. He recently introduced a monthly service, Client Articles, which contains articles (and cartoons) that can be sent to clients, for example as part of your quarterly newsletters.
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
The news from Japan should, first and foremost, be viewed as a human tragedy of horrific proportions, and we extend our blessings and sympathy to the people affected by the earthquake, tsunami and nuclear reactor crises in Fukushima. People from around the U.S. are pledging support for the humanitarian efforts. Perhaps the easiest way to get support quickly is to dial the Red Cross by typing in 90999 on your cell phone or 1-800-RED-CROSS on a regular phone line, or go to the web site here. Reports say that the Japanese chapter of the Red Cross is one of the best organized in the world.
Other possibilities are the International Rescue Committee, AmeriCares and UNICEF.
The economic impact of this tragedy is much harder to gauge. As you have no doubt read, the 6% drop in the Japanese stock market on Monday was followed by an 11% drop on Tuesday—the largest two-day decline in 40 years. But Wednesday trading saw a remarkable 5.7% increase, proving once again that the markets tend to overreact to shocking events, giving savvy investors a chance to buy shares at a bargain. Shares of Toyota gained 9.1% on the day, SONY Corp. was up 8.8% and Isuzu Motors closed 10.5% higher—the kind of gains that we normally associate with a year of trading.
Disruptions also spread pain and opportunity disproportionately among the corporations on the scene. Japanese insurance companies NKSJ and MS&AD are likely to have direct exposure to earthquake-related property losses, but some of their losses will be absorbed by the government-sponsored Japan Earthquake Reinsurance Company and private reinsurance arrangements. Similarly, Japanese construction companies will almost certainly see a windfall of business, which may be why Nishimatsu Construction Co. share prices rose 5.8% and Kobe Steel was up a remarkable 15% in Wednesday’s trading. At the same time, there is likely to be a chill in global construction of nuclear power facilities, while governments and communities assess safety measures already in place.
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