Most of us old folk remember Paul Samuelson; his Economics 1-A text was popular for years, maybe still is. But Samuelson said something once about the risks that went with the territory - “to be published is to be found it.”
This plagues the profession to be sure but we have no intent of acquiring Samuelson’s paranoia. In an earlier piece we referred to a track record or Scorecard. It’s easy to fill in the blanks with success and hope clients forget the rest.
In that spirit, we must revisit our work on the Mar/10 Japan earthquake and economic repercussions.
We noted Mar/14 - Having the advantage of working closely with Japanese institutions, past years, we can confidently advise our clients to look for more rapid resuscitation than is now priced in. We then stated on Mar/15 that in the world-wide market sell off, the market crowd had over reacted. We predicted markets would recover, and noted again that it was best for clients to expect more resiliency in recovery, not less and that this is to serve as an anchor as this event continues to unfold. This was the correct appraisal. Observers expect Q2 Japanese GDP to slip but for Q3 GDP to be positive.
However, we predicted Mar/16 the high risk of repatriation - Japan selling US assets in a panic, taking the money home and tanking our bond and stock markets in the process. It did not happen, at least not to any appreciable degree. Next, we predicted Apr/1 that Japan will issue bonds and that, although the Bank of Japan denies it, we expect them to at least partially finance this effort. As of today the Japanese government says they hope to avoid issuing new bonds, and, if they do, the Bank of Japan still denies that they will buy any of them! Finally, we predicted this event was either a wash or modest spark for the US economy. We don’t have that answer yet.
Robert Craven
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