One of the traders I follow closely is Doug Kass, he called the crash as well as nailed the recovery from March 2009 in the stock market. Note I said stock market recovery, not economic recovery. I remain unconvinced we are in a economic recovery. I am more inclined to believe the stock market recovery is real, since profits are up, but understand the revenue base for most companies is not higher than several years ago. Basically a new normal at a lower level. Doug is a bear and true pessimist and being a optimist I need his leveling in my thinking.
He uses what he calls "Black Swan" events to describe unforeseen events such as the situation in Japan. Egypt, or Libya. You frankly never know what is going to happen so be careful. That frankly is true. But in a different sense we as a generation in America have been blessed to live in a time when things were abnormal. Since the end of World War Two we have known up until the start of the 2000's a time of calm with few really bad things happening. A Pax Americana if you will. Now yes, I know there have been problems and world wide events that were bad, but Americans have been generally shielded from the effects. We can thank the Generation that fought and won the 1940's war and following Cold War for that. They were the ultimate administrators and frankly "real" men and women who knew how to get things done. Their overwhelming power and personal presence brought peace and stability to the world.
Actually we are now in more normal times and that means lots of crisis and problems. Budget deficits and unsustainable national debt, foreign problems such as Libya, Japan, China, and Iraq. Not enough oil and food. It goes on and on. The current generation in charge is just not up to the task to solving such problems. Not to blame Obama or any other president, but none since George HW Bush have the gut check talent and skill to make problems go away. It is a generational thing in my opinion, today's adults just did not have the hardship the WW two generation had and has not developed the personal toughness.
Investing in an atmosphere were things can be unsure and full of "Black Swan" events make for difficult investing if you are looking calm waters. But if you can hold the panic and be calm in this time it can be the best of times for investing. For instance during this Japan crisis I have numerous options that are netting me some real nice buys in stocks right now, which will pay off a couple of months down the line if I can be patient. How can the average person take advantage? You have to be patient and move some cash to mutual funds or beaten down stocks. How about moving some of your money market holdings in your 401-k into stock funds. Again, as stated earlier go buy a home in you are in the market and can afford one. Better yet, buy some Uranium stocks or nuclear power utilities. Duke Power or Southern Company are getting to be better buys by the day. If you are a risk taker, URA, a ETF full of uranium stocks. Lastly, if you are wanting to play the political angle, try SHAW, an engineering company that works on nuclear facilities with deep ties to the Democratic Party.
The smart investor is the one who remains calm when everyone else is selling.
One other note and I know I am not going with the prevailing thought here, but avoid investing in Japan. If you are a agile trader right now that might be ok to catch the bounce, but long term it is not a good idea. In my opinion Japan will not recover well from this disaster. There will be lots of buildings and infrastructure that will never be rebuilt. Why? Because Japan, like many nations in Europe is a dying society. Japan is about a decade ahead of the European countries in regards to aging population. As with many highly advanced nations on earth right now Japan is not replacing itself population wise. There are few children and almost no immigration there. I can not see how Japan will have the workforce to man the factories and shops there two decades hence. There is frankly no need for new schools and more roads. I would expect that Japan now the thrid largest economy on earth will be down several notches a decade from now. Toyota, not a dumb company, is moving many of their factories off shore. Not only because of the currency trade, but because they can see this as well i would expect.
Full disclosure, I own either long or as an option DUK/Duke Power, and SO/Southern Company.
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