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Brace for a global recession (update 2) – Japan in recession, rest of Asia next. Next stock market bull run 5-8 years.

Posted by Adrian on November 18, 2008

Japan officially slipped into recession a day ago (17th November 2008 to be precise); technically Japan has been in recession for about 9 months into 2008. Japanese car exports (mainly to China), was the only positive contributor to their GDP, when everything else was collapsing, property, shares, machine orders, technology and consumer goods – pretty much everything Japan created was now piling up adding to large inventories. As the US slows down more dramatically going into September 2008, Japan’s GDP was also shrinking dramatically (0.1%). Now with China going into recession, thus ultimately effecting Japan, it therefore officially sent Japan into recession. Again there is a false belief that Japan could emerge somewhat less effected in a global recession. We have to remember Japan feeds US consumption from cars to technology. To assume that Japan could survive (retaining a 2nd place as the worlds largest economy) via it’s mass of savings or a re-feeding Chinese demand, is quite deceptive. In the sense Japan is an export based economy, that is not commodity driven, in fact Japan doesn’t mine anything and is an importer of oil. With global consumption slowing sharply throughout the world, a country that ‘produces’ like Japan is in big trouble. It is also a country that has never really come out of two decades of deflation, when inflation comes back; especially on oil and food. This could evaporate any domestic savings after the current ‘slump’. I honesty cannot see Japan rising as a powerhouse economy after this global downturn is through. As for the rest of Asia? Yes, Hong Kong, Singapore, South Korea, Philippines, Indonesia and quite possible China will all follow suit into recession. Joining the US, Germany, UK and the rest of Europe – into a global slump.

The markets know this, therefore there is continuing selling on all market indices. As discussed in The falling Oil price and Treasuries ‘ bank bailout plan’ falls apart. , we may not see significant rallies into 2009. Partly because the start of the recession is here, from a fear perspective it could be a long and harsh economic slump.

If you look at my portfolio, it is mostly made up of index puts on major commodity producing countries and their stock markets, currency put warrants on the AUD, RIYAL, EURO, PESO. Gold and gold shares (bullion), Gold ‘call’ Warrants. No company stocks at this point and I still think the markets have yet to find a bottom; I also think there will be a slew of creative destruction in the market. A depressed global stock market that could last 5-8 years, with sporadic rallies, but no way close to the highs it reached in the ‘boom’. In saying that, I personally see biotechnology stocks (on the premise that bird flu will migrate to human strain), renewable energy and energy stocks (as the next big crisis and more significant one will be energy) as possible stocks to watch. Geo-political turmoil will also occur, especially in Asia, India and possibly China, middle east (if oil drops lower). So relatively safe countries (western) could see some opportunities in real estate from overseas investors (this is very speculative at this point most since most western countries have huge housing bubbles). All in all, the governments of the world will pump the money and pour millions into infrastructure and stimulus cheques for the consumer. Probably too late, since all countries are contracting at the same time. Depleting sovereign funds and emptying reserves will equate to more countries going bankrupt than surviving a recession somwhat intact.

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2 Responses to “Brace for a global recession (update 2) – Japan in recession, rest of Asia next. Next stock market bull run 5-8 years.”

  1. Find your site in Google, and it has a lot of useful information. Thanks

  2. […] markets are still volatile, so I am in nothing in stocks. I mentioned Biotech in Brace for a global recession (update 2) – Japan in recession, rest of Asia next. Next stock market b…, The biotch industry will shrink significantly from lack of finance as will junior miners and the […]

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