A lot can happen in a week. Visiting friends in the south of Spain at the end of the week before last, I was surprised to find they had their television on permanently following events in Japan. My regular article had already been filed but as the day – and the weekend – wore on, it became clear that any thoughts I might have had on subject matter for the next piece would have to be revised.
The problem is that events are moving so swiftly there is little guarantee that what I write today will be relevant a week hence.
The Japanese earthquake and the situation over the damaged nuclear power station are ongoing issues that are changing day by day. And in north Africa and the Middle East, similarly dramatic events are unfolding.
These centres of uncertainty have combined to drive investors from risk assets into those of greater security. Government bond yields here and in the US have fallen from the peaks achieved when equities last hit their highs of the year. The fact that inflation worries had been driving bond yields higher has been swept aside. The shutdown of vast swathes of industrial capacity in the world’s third- biggest economy has sent the nervous scurrying for cover.
The Japanese economy, which accounts for 6 per cent of global gross domestic product, was sluggish before this catastrophe and some aspects of the impact on its manufacturing capability will have implications for the rest of the world.
Car production, in particular, could be hit. Japan accounts for around three-quarters of all in-car navig-ation systems, for example. But quite why the yen went so much higher is less easy to explain, unless wholesale repatriation of foreign assets to help pay for the reconstruction takes place.
As it happens, the rebuild-ing of vast swathes of northern Japan might provide a welcome boost to the economy there. The wild card is the Fukushima facility. Comforting words from the authorities over there cannot conceal the fact this is an incident without real precedent in a country with a reputation for being economical with the truth on nuclear matters.
But the Middle East is arguably as big a worry, if not greater, than Japan. Troubles in Bahrain have highlighted the divisions between the two major denominations of the Muslim world. At times, the rivalry between Shias and Sunnis can make the sectarian conflict between Catholics and Protestants here fade into insignificance. And if the troubles should travel to Saudi Arabia, the world’s biggest oil producer, who knows what might happen.
So it was with some surprise that I found the good folk of Manchester optimistic at the first 2011 roadshow held by the Association of Investment Companies.
There were few questions about Japan, though the escalating price of oil engendered some interest.
Talking to one of the fund groups present in Old Trafford, I learned that a number of their investment professionals had been sniffing around the Japanese trusts they ran, with a view to taking advantage of the rapid and considerable fall the market had experienced.
It sounded to me like the Rothschild principle – buying when the cannons are thundering, to sell when the violins are playing, to paraphrase the words of the original NM Rothschild. I only hope the cannon fire finishes soon.
Brian Tora is an associate with investment managers JM Finn & Co