InvestingPolitical Impact on BusinessUncategorized

Disproportionate Sell-off of Japan

No doubt Japan has suffered a tragic loss of life and property, and the risk of nuclear radiation is real.  The problem here is the apparent panic sell-off which is already out of proportion with reality and more in proportion to a real war.  What’s pushing this negative market activity?  Is it just the news, or is it some other fear? Disproportionate is right, unless you are banking on another quake and tsunami.  I seriously doubt the productivity of the Japanese people has been impacted enough to warrant a collapse in their corporate world.

Maybe the markets are down because of the number of Americans who begin standing around pointing fingers at others, trying to blame them for being unprepared for one of the worst quakes and tsunamis in history.  Reminds me of what happens when I honk at someone to move out of the way and their reaction is to either hit the brakes and look around or stop and stare at you.  Few ever get what the honking is about, or they are just angry and impolite enough not to care.

It is kind of sad to see American news focusing on a few boats bashed around by a wave, or one guy being washed out to sea in comparison to the overall tragedy in Japan.  Really though, the comparison may be better explained by how little economic effect it will have compared to the surviving population.  Japan will survive, and so will America.

Although this sell-off in Japan is disproportionate, it may actually be the correct thing in comparison to where the markets were.  It may be that a correction was at hand and the quake, tsunami, and reactors simply allowed the markets to face the truth.  I really can’t say for sure.  In the U.S. this simply is helping the markets get on with a correction which was already forming and may help it end that much sooner.

Overall, humans need to get a bit better grip on reality.  If they would stop hyping up prices in commodity, stock, realty, and other markets we wouldn’t be as susceptible to large sell-off activity.  Imagine if people invested according to the merits of valuation and earnings rather than speculation of future value and the psychological need to participate with the crowd.  But then that would imply people would be doing their own homework and understand the risks they take.  On the other side of things, if people were not as inclined to over-react there wouldn’t be as much opportunity for those who know how to play the game of risk and investment.