Japan disaster thoughts

Japan Disaster Thoughts

First, we offer our most heartfelt condolences to all those who lost their lives, to their families, and to all those now in unbearable circumstances. Placing numerical values on the economic losses is an intolerable insult to all those who lost their lives and to their families and relatives, and is morally indefensible.

 
Uncertainty is the operative word in Japan, but as we take a step back and think about the broader economic impact, it’s worth noting that this natural disaster is happening at a time when the U.S. data looks solid (good valuation vs. bonds/cash, the market has a free cash flow yield close to 7%, among the highest in history,  and balance sheets have never been better, confidence, consumer spending, hiring, and the availability of credit are increasing, and equity funds see inflows).

 It is very difficult to quantify the long term impact of the Japanese disasters at this stage. Hence we should not make any formal changes to portfolios at this point. The portfolio managers of the international funds you may be invested in, are making changes in the funds if they believe they are necessary.

 
 Japan today accounts for a smaller share of the global economy than at any time since the 1970s – 5.8%, compared to 7.5% a decade ago and more than 9% in the early 1990s. (Source: IMF, WSJ)

 
 US send 7% of exported goods and services to Japan (one-fifth as much as exports to European Union). The entirety of American exports to Japan account for less than 1% of the total U.S. economy. (Source: U.S. Department of Commerce, WSJ)

 
 Japan's stock market, which twenty years ago was the most valuable in the world, today accounts for a smaller share of global equity values than at any time in decades. On the eve of the Kobe earthquake in 1995, it accounted for nearly 30% of world stock market values. Today, just 7.5%. (Source: WSJ)

 
It may be more of a human story than a big economic story (like 1929-1945-1973-1987-2001-2008…).

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PS: Please find below a link for a video on the surprising truth about what motivates us  http://www.youtube.com/watch?v=u6XAPnuFjJc 

This newsletter was first published in March od 2011

http://bourbon-fm.com/file/BFM_Newsletter_03_2011_Markets_Trends.pdf