Disaster in Japan: The REAL Impact

Excuse my French, but all hell is breaking loose around the globe.

The disaster in Japan has completely overshadowed news of the still-raging Middle East crisis.

And before that, the Middle East crisis violently shoved aside the historic budget battles in Washington, Wisconsin, Ohio, Illinois and elsewhere.

This triple-punch to the gut is hammering world’s investment markets.

And now, things are getting really strange …

As Japan’s nightmare unfolded, most experts expected investors to move their money out of Japan and into the U.S. or other major markets.

But in reality, the exact opposite is happening!

Yesterday, for instance, the Dow fell 242 points, the S&P 500 plunged 25 points, the Nasdaq declined 50, as global investors dropped U.S. stocks like hot potatoes. It was the market’s largest one-day decline in 7 months!

Even more telling, the Japanese yen soared to its highest level of all time!

But why? The answers are disturbing:

First, the U.S. market is vulnerable for a host of reasons — the continuing depression in housing, surging wholesale prices, rising long-term interest rates, and more!

Second, on the other side of the Pacific, Japan’s insurance companies are expecting to take massive hits. The insurance claims from Japan’s earthquake, tsunami and nuclear nightmare are bound to be both extremely large — and extremely difficult to estimate — for a long time.
I know because when I was a young analyst for a Japanese brokerage firm in Japan 30 years ago, and our primary clients were Japan’s largest insurers.

That’s how I learned that Japan’s Ministry of Finance (MOF) had been preparing Japan’s insurers for this disaster for many years.

They knew the next “Big One” was coming someday — an earthquake that could cause unprecedented volumes of claims both to property and casualty insurers as well as life and health companies.

They also they’d need liquid assets OUTSIDE of Japan to help pay the claims. So they mandated that insurers hold a solid chunk of their reserves in U.S., German and other foreign government securities.

How much? Huge amounts! Because they feared the earthquake might hit Tokyo. Instead, thankfully, Tokyo was spared a direct hit. But no one planned for a giant tsunami — let alone a nuclear disaster all at the same time.

Now the Japanese insurers have to start cashing in their foreign holdings, with most of those in U.S. markets. That means they’ve got to sell dollars, buy Japanese yen and then repatriate that money to help pay claims.

That’s a key reason the yen is surging, while the dollar plunges against the yen.

Third, the Bank of Japan will liquidate additional amounts of their U.S. assets to pump into the domestic economy and help finance reconstruction efforts.

Fourth, global investors aren’t dumb: They know that, to support the U.S. bond market, the U.S. Federal Reserve is going to print money hand over fist.

That not only hurts the U.S. dollar over the long haul … it also drives more money into all those assets that rise when the dollar falls, especially silver and gold.
My overall view …

An American Apocalypse
Has Now Begun

This new crisis could not have come at a worse time for American families. Unless our government makes an abrupt, 180-degree turn, it can only add fuel to the fires that have already been burning — a falling dollar, surging food and energy prices, higher U.S. interest rates, and more.

This is why I have just recorded and released a brand new video presentation — American Apocalypse.

In it, I show you why millions of Americans are likely to lose their incomes, their savings, their buying power, their homes.

I document the reasons why your liberty … your financial security … your retirement … your family’s physical safety … are now in grave danger.

Plus, I give you a clear plan to insulate yourself and your wealth as this historic catastrophe unfolds.

Click this link, and the video will begin playing on your screen right away.

Good luck and God bless!

Martin

Dr. Weiss began his career in 1971 when he founded Weiss Research, dedicated to evaluating the safety of financial institutions and investments for consulting clients.  He is the publisher and contributing editor of the financial newsletter, Safe Money, known for its track record in picking major turns in interest rates, and serves as co-editor for a number of Premium Services. He is also the author of The Ultimate Safe Money Guide and The Ultimate Depression Survival Guide.

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