Financial responses to unfolding global events, first the Middle East and then Japan

Our hearts go out to the families who lost loved ones in the earthquake, Tsunami and nuclear reactor catastrophe of Japan and will hope for the best for those fighting with their lives to contain the meltdown.

The globe was hit first with the turbulence in the Middle East, affecting petroleum availability and delivery, driving up gas prices at the pumps while hitting bond values so that mortgage rates fell down.

In the last week, the earthquake, Tsunami and nuclear reactor catastrophes have affected Japan at humanitarian, financial and political levels not seen in decades

These impacts have led to drops in our stock markets and others around the world. Japan supplies about 9% of G.D.P., so that is no surprise. As with any dramatic change, there are always opportunities.

So how do you react? What do you do?

The New York Times compared the nuclear meltdowns to the recent financial meltdown, only not many lives were lost from bad mortgages, economic downturn, house foreclosures and layoffs.

The comparison provides a bit of help. Therefore, other than any action you may take for relief efforts, the financial outlook is somewhat the same as a couple of years ago, recast this way:

 countries struggling to recover, including the US, will experience supply shortages such as the GM plant just shut down awaiting parts from Japan,
 this will frustrate those recoveries in the short-term while alternatives are found and Japan recovers,
 as with the oil availability, the Japanese production short fall should not have a long term impact, either from Japan rebuilding or other nations taking up new supply roles,
 if bonds are a measure, the confidence in the Japanese government has not altered dramatically (bond yields changed some, falling from .57% to .51%)
 Japan will bolster its own economy from government financing of repairs and possibly stepping in where earthquake insurance did not cover or was never purchased,
 Japan will have to rebuild its confidence as well as it sources of energy
 there may be investments to be made in Japan – so it is better to shift the investments that any wholesale sell-off

Summarizing, these events certainly will have financial impacts now, as well as human and emotional, but none of them are cause for selling stocks to buy gold or to go all to cash – just as with the fall of 2008, staying invested paid off (those who sold for cash never got back in time to recover their losses).

In fact, none of the impacts is cause for selling Japanese stocks to buy other international stocks – at least not in general. There will be moves to be made among the specific stocks you hold throughout the globe, but as with the financial meltdown, sticking to your investment strategy, and holding on to your asset allocation, during the nuclear meltdown will be the best course!Let me know your concerns and comments …. It is clearly not a happy time for many

Take care and good luck,

Steven