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Doug Casey and the Japanese Disaster

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Unbeleivable and heartbreaking disaster.  Doug Casey's thoughts below.
March 14/2011

Casey Research - Doug Casey

Revisiting Post-Kobe Japan

By Kevin Brekke

I began today’s topic feeling a bit hesitant about how to approach the need to guard your investments in light of current events in Japan. As a matter of principle, I do not seek, nor advocate, to benefit from the death and suffering of others. I abhor war and violence and refuse to invest in companies playing the politics-by-other-means trade.

But there is always a seam in the ethics argument where personal principles meet the practicalities dished out by the real world. And Friday’s catastrophic earthquake in Japan was certainly such a seam. Although the loss of life and destruction in Friday’s earthquake resembled that of a battlefield, it was the product of an unpredictable geologic event and not that of a conspiracy of men. In either case, I think one has the duty to protect your wealth and investments that might stand in the path of any adverse outcomes. And that might include some near-term shorting opportunities.

The fallout from the earthquake, and the final tally of destruction in both human and dollar terms, will take months to fully comprehend. Yet, many consequences will begin to play out immediately, and among them will certainly be financial and economic uncertainties. Whether they will be short, medium or long term is hard to know, so I examined the after-effects of a similar event for clues.

I will be short on words and long on visuals in today’s article. The following charts show the effect of Japan’s 1995 Kobe earthquake on three macro-measures. It is interesting to note that in all three cases, a return to the pre-event trend was achieved in under a year.

We are always on the alert for black swans that trigger a series of events that lead to an unanticipated and unforeseen end, such as the assassination of an obscure Archduke in Sarajevo that culminated in World War I. However, my sense is that the impact of Japan’s earthquake on global finance and economies will follow a path similar to Kobe’s – brief turbulence but not a game changer.