Japan apparently is on fire. There is looting in the street and martial law has been declared.
What? That’s not right? On September 17th 2001 the S+P 500 fell 4.9% in reaction to what I think was the first very meaningful terrorist attack on US soil. The US at that point was facing huge unknowns. 4.9%
In the last two days the Nikkei is down 5.6% because some Internet company had its offices raided. Huh? Bill Cara touched on this too. Something does not add up. I missed the run up in Japan so luckily I am missing whatever is happening now.
I write about understanding what a stock is capable of doing in the face of news, good or bad. The same applies to markets. Japan is capable of panicking. This has happened many times in my career. The panics are generally larger than what happens here. Last night there was some panic in Australia. That market dropped 1.6%. That is about as big as I have seen there since I first started watching that market.
If you are going to invest in foreign stocks and plan to do so with more depth than just buying the EFA ETF, you need to study and understand this.
A lot of managers have very heavy exposure to Japan. This type of decline just goes with that territory. By avoiding or underweighting that country you reduce your portfolio’s volatility.
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6 comments:
Roger,
here is a link to a weekly chart of the Nikkei: http://charts.dacharts.com/2006-01-18/Globetrader_27.png
There was just one meaningful correction in this run-up from 10000 to 16560 in October last year. And now people are screaming because a market being up 65% in 9 months is correcting 5%.
Sure that's fast, but consider this: There are a lot of professionals involved in the Japanese markets and they know that this party has lasted a lot longer than warrented by the current data. Japan's economy is finally turning around, but that's it, it's turning, it's not steaming at full speed. And now we see a long overdue reaction in the markets. Apparently caused by a fraud at a popular internet firm, but if not this, then it would have been something else. The party was over, when the Nikkei made the 16000 target. Let it consolidate and enter at reasonable prices in this market.
Btw: I always thought living in Germany I could get the best of both trading sessions as Asia usually is relatively quiet, but missing this sure stings.
chris
Thank you for sharing this info. Chris underscores, from a different angle, the extent to which greed is built in to the price. Good stuff.
The market was indeed ripe for consolidation, but there is a bit more to it than one internet stock having a spot of bother with the regulators. The rally has been fuelled by high levels of margin buying; brokerages have stopped accepting Livedoor stock as collateral for margin transactions, so there is a good old-fashioned scramble for the exit from leveraged buyers. I don't see why this should knock the meaningful economic recovery off its course, but it does blow the froth off the market and prompt a welcome reappraisal of how far we have come, and how fast.
It occurs to me that some of this might be tech induced as I suspect Sony, Hitachi and others are selling off on Intel related worries.
dudn't have sh*t to do with anything other than an excuse to sell off because buyers are stepping aside. sentiment is stupidly giddy globally in the equity markets. and the retards are plowing funds into emerging markets in droves because the last two years have been great. this behavior is indicative of topping.
i see people are blaming it on trading volume being too heavy or raids or whatever. What did they blame the behavior on in 2000? 1987? 1990? 2002? 1995? 1998? and on and on and on.
great comments, thanks everyone
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