Sunday, March 13, 2011

Japan’s Tsunami: One of the biggest act of Natural Disaster in history of Japan!

Nikkei 225

Nikkei 225 Index:

Japan recorded the worse Earthquake ever in its history and this is no good signs from the nature. We believe each act of human on this planet is governed by nature and we do what we do in a rhythmic manner. Human beings as a whole in crowd cancel out random movements and what is left is a pure game of psychology in markets. We thought of showing one of the leading Japanese index – Nikkei 225 that shows how the economy as a whole has been doing in Japan. Japan’s equity markets closed at the day’s low when the terror struck its shores. The above chart shows that we were already due for a major correction to the least or resumption of a big downfall that started in 2007. The entire move down in 2007 – 2008 was impulsive 5 waves down and we corrected up in a complex W-X-Y correction as shown. We think the pattern is clear and we have started with a big down fall in Japanese market with recent natural disaster just acting as a trigger / catalyst to this fall. It has struck Japan at the time when markets were just about to turn down. Now this disaster will be blamed for the downfall in equity markets. It does has washed away millions of dollars’ worth of resources but we study history and know that over long term basis an act of disaster either natural or by human’s act actually stimulates the economy in a few years’ time.

Japan is what it is today due to the bombing on Hiroshima and Nagasaki during World War II. They fought back strongly after the terror and became one of the strongest economies of the world.

We remain strongly bullish over long term on Japan with some correction due over a medium term horizon. We are going to see this economy booming back to the way up to the levels it has not seen before.

Japan has a history with itself about their attitude towards disaster and they have all that it takes to come out of it. This disaster has created space for their developed economy and government can now spend on infrastructure ( Government was spending to stimulate the economy by the way of concreting the beds of sea shore since there was nothing to spend upon before) which will be most required once things settle down.

We strongly believe in Japanese people and in their attitude to fight back the disasters! They will come back strongly in a few years’ time when Japan will be completing its worse downfall that started in 1989 and overcoming the worst natural disaster that struck them!

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