Monday, March 21, 2011

Why I Bought Japan Last Week

I believe the best bargains are found at times of maximum pessimism. Perhaps one of those opportunities presented itself last Tuesday when the Japanese stock market plunged over 10% in a single day due to the effects of the earthquake and resulting tsunami. While my heart went out to the people of Japan in their time of tragedy and need, I also saw the potential for recover amid all the wreckage. Many TV stations were airing personal videos of the tsunami:

At the same time the news media was stoking fears of a possible nuclear meltdown:

To many it looked like Armageddon had struck Japan and a large swath of the island was about to be contaminated with radiation. While the ultimate outcome is still unknown, I decided things couldn't get much bleaker than last Tuesday. At that time, I knew there would be some nuclear fallout. I also knew the government of Japan was not being honest about the true condition of the damaged reactors or the risks. In these uncertain conditions, I placed my bet buying into the Japanese market as a whole with a 3 - 7 year investment horizon in mind, instead of trying to bet on individual companies whose fates I did not have any specific insight into.

Why did I decide to invest in Japan? Because, though the situation was bleak, I though it was being misappraised by the media pundits, and the images that I saw on TV made me believe in:

  1. the ability of the Japanese people to bond together and recover more quickly from this tragedy than anyone would ever expect.
  2. the character of the Japanese people (who did not loot or lose any notion of socially acceptable behavior during this tragedy) and their work ethic and ability to sacrifice for the common good.
  3. the nuclear situation was not as bad as the worse case scenarios and that the recovery from any fallout or radiation would not be as severe as the media hype indicated
  4. and the increased spending to rebuild would provide a multi-year uplift to the Japanese economy and just might shake them out their multi-decade doldrums.
Whether this bet will ultimately pay off only time will tell.  I will be pulling for a Japanese recovery not only because my money is invested in their companies, but because I would like to people who have endured so much tragedy and loss of life through an act of God rise up from the ashes and rubble to rebuild a new and prosperous life for themselves.

1 comment:

  1. Good call. I didn't buy Japan directly but bought a global ETF. I've never liked Japan because they seem so contradictory. Part of their economy is super competitive - Sony, Toyota etc. and another big part is highly socialist in nature.