Japan must recover from several catastrophes with the nuclear one having the longest impact and global ramifications. Should the use of nuclear energy by developed and developing countries be hampered, higher oil, liquefied natural gas (LNG), and coal prices are likely. Recent spikes in oil prices have had more to do with political unrest in the Middle-East but it will be very interesting to see how the nuclear questions get addressed in the next several months.

My take = maintain ownership of energy producers with normal portfolio weightings at this time and be sure to take gains as made.

The insurance industry, particularly the reinsurers, have been hit hard by numerous disasters around the world not just Japan and the hurricane season is just beginning. To put this into perspective, “the reinsurance capital base is US$220 billion” and prior to Japan their “capital base had already taken a 10-20% hit.” ~Mary Pryshlak, CFA.

My take = limit exposure to insurers/reinsurers

Shortly after the crisis, investors were concerned about supply chain disruption plaguing the auto and electronics industries. Although a big concern, supply chain issues are being dealt with fairly well considering the magnitude of damage done.

My take = caution required when acquiring equity positions in these sectors and a long-term time horizon is preferrable here.

The resiliency of the Japanese people is impressive and investors, in my opinion, can stand behind them. As with any investment, risks must be understood and close monitoring for changes in economic environment is prudent.

Until next week,
Susan R. Linkous