One of my goals in my newsletter is to bring to your awareness things that I find interesting or alarming.
The article below is in the “alarming” category.
Japan borows more than it raises in taxes, and its debt amounts to two years’ worth of Japan’s economic output.
Japan has the highest debt-to-GDP ratio in the world. Half of the country’s tax income is directed to simply servicing it’s debt.
In addition to Europe and China (which I’ve written about in the past), Japan is one of the next huge players we’ll be unraveling in the future. I have great concerns about investing in Japan, and a Euro-Pacific investment is the most troublesome to me.
Be careful if you have that allocation in your portfolio.
The 3rd Quarter 2011 is over and I have a slightly longer video this week because I want to address the current environment and how things may shape up going forward.
A big theme is my advice to assess your overall plan and risk tolerance, and also to ensure you’re looking at both positive and negative points of view on the markets instead of just one view over the other.
I send my newsletter and videos on a weekly basis, so if you watch only a few througout the year, at least watch my more comprehensive quarterly videos.
Like it or not, globalization is here to stay. Japan, and the impact on supply chains throughout the world, is only going to reinforce the move towards a diverse, diffused world economy.
In the coming years, we’ll see an even greater push toward interrelatedness amongst countries, and each country’s businesses will rely on many countries for their materials. Diversification of supply is key.
Japan is going to recover and recover quickly.
TRANSCRIPT:
Hi Clients and Friends, Mike Brady here.
This week I want to talk about globalization. It’s here to stay and Japan is just an example of why it’s going to stay. Periodically, I talk with people here in Boulder who think globalization is a bad thing. I’m not here to say that it is good or bad. I have my opinions, but now is not the time to get into that political discussion. But what I am here to say is that it is not going anywhere but more globalization.
Japan: Toyota and Honda, 68-72% of the parts for those companies are actually made outside of Japan. So they are going to continue to make automobiles. China and South Korea and other places that are getting their materials from Japan are having a little bit of supply issue, supply problems, for their products that they export to the rest of the world; or export back into Japan once it’s finished goods. And so, Japan and South Korea and frankly, much of the world is going to diversify, in my opinion, going to continue to diversify their supply chain. So that an event from one country does not disrupt it, they’re going to need 2, 3, 4, different supply chains, sources, for their goods as they distribute it into the rest of the world.
I do not believe, that Japan, a year from now a year from now, two years, five years from now, that we’re going to look back and say that this was a huge economic event that had this very negative impact. Japan as a country is the third largest economy. It is a very wealthy country. They’re very resilient people. And while this is very painful, what has happened, I think that Japan is going to pick itself up and pick itself up very quickly. In the meantime, countries that have relied upon Japan, and will continue to rely upon Japan will continue to rely upon Japan but also diversify into other countries.
So from an investor point of view, the question we might ask is how can we benefit from this trend of diffused supply chains, diffused need and globalization? And so that I think that is really the question that we need to ask ourselves.
I continue to believe that 2011, this year, will be a positive year for the stock markets. And frankly, I’m not changing that. Nothing that I’ve seen in the last three months has changed that opinion. In two or three months as the buying of the, from the, QE2 changes or stops, that will be another obstacle that we’ll have to watch very closely to see what happens.
Anyway, that’s what I’m thinking about this week. I hope you’re doing wonderful.
My name is Mike Brady. My company is Generosity Wealth Management. I am a registered rep with Cambridge Investment Research. My phone number is 303.747.6455. Hope you’re doing well. And I’ll talk to you next week, bye bye.
The tsunami that hit Japan last week and has affected their nuclear reactors is causing great concern in the stock markets.
The Nikkei dropped 11% a few nights ago. The US markets have dropped 2% this morning (Tuesday as I write this).
Now is the time to determine if you’re gambling or investing?. Is this an emotional sell off or a harbinger of things to come?
I discuss Emotional Selling in my video this week.
TRANSCRIPT:
Good Morning Clients and Friends, Mike Brady here.
This week I want to talk about emotional selling. The tsunami hit Japan late last week. I’m recording this on a Tuesday morning and overnight the Nikkea went down 11%. It is just absolutely getting killed. Our markets have opened up very sharply down. So the question I’m posing is what do you do in a situation like this? If your first inclination whenever a huge catastrophic event happens, and now we’re trying, and looking and waiting for what’s going to happen with these nuclear reactors, is if your first reaction is to sell, “I’ve got to move right to the cash!” Then you might ask yourself, are you gambling or are you investing?
What I look for, and if you watch some of my videos, particularly my beginning of the year video (hopefully, you’ve watched it time and time again, it’s must watch) that we’re looking at months, weeks, and the year, of what the market is doing; the value of it, the quality of the market. Because there always going to be events like Japan right now, is happening. I don’t want to minimize the impact of what is happening there in Japan. Japan is a huge global economic player and what is happening there is absolutely horrific. So please, don’t take this the wrong way- that I’m trying to minimize it.
But I am looking at historically, there have been huge events- in our most recent times, the last 20 years or so, there’s been Gulf War I, there’s been Gulf War II, there’s been 9/11- where the market really went down. When the markets reopened that, you know, the week after, and the quarter ended up being positive; the next quarter after that.
So, you know, the major impact that this is going to have, I don’t know yet. I absolutely acknowledge that I don’t know and anyone who says they absolutely know is pulling your leg.
What I will do is to continue to watch this very closely. I do not get emotional about it. You know, emotional selling I think, doesn’t serve anyone’s best interest. I might change my mind in days, in a week, and in a month. That is why you can’t be beholden to your theory, you know, so very stringently. But you do have to kind of keep a straight arrow. What are you doing? What are the value of the market? What’s the impact going to be, not just the immediate impact but one month, one quarter and one year from now? And, with all the data that I have right now, as it’s being compiled, etc., I’m not convinced that now is the time to sell out. So I’m not doing anything with my portfolios for clients. But you know, I will continue to keep you abreast that’s why I have weekly newsletters so you can know what I’m thinking.
Anyway, I just wanted to kind of touch base on that. Hopefully, you’re getting this video, I’m doing this on a Tuesday morning, getting it a little late to my compliance department. And hopefully they’re really good about getting it turned around so you are getting this on a Wednesday morning. If not, you’re getting it as soon as possible.
So anyway, have a wonderful week. I’ll keep you informed.
My company is Generosity Wealth Management. I am a registered rep with Cambridge Investment Research. 303.747.6455. I am here in Boulder. If you’re my client, I love you. If you’re not my client, I still like you but I’d love you to be my client. 303.747.6455. Thanks bye bye.
