TSE 2024 Black Monday, slow Obon Weekend and a mega-quake warning as a cherry on the top.

Three things were discussed over the long Obon weekend in the circles I move around in: what happened last week, particularly the equities market crash, what was happening over this weekend and where were the Japanese tourists and finally, the coming week and are we all toast in a humongous earthquake with a fracture along the Nankai trough?

Anatomy of a Fall?– I do not expect a serious deterioration anywhere in the confidence in Japanese equities despite the commentary in the press. It was an almost perfect repeat of 1987 Black Monday with a combination of crowded trades, heavily margined positions and portfolio risk computers kicking in with the volatility spike and issuing orders to sell. The FSA was worried about NISA and Japanese retail losing faith and asked brokers to call clients – something they do naturally – and get a read on the mood.

It appears they were buying the dip, something the AI in the portfolio risk computers do not do, but the RI (Real Intelligence) in warm blooded traders do. Please do read my report ‘Fill Your Boots, Empty Your Boots’ and message me if you would like to go on a research trial.

Fewer Japanese Tourists – Nippon Life warned us from its survey that 46% of the Japanese population would not be going out over Obon as it was too hot (35C in Tokyo), too expensive with too many foreigners around and the risk of being attacked and eaten by a bear was too great – the furry kind of bear, not another knock on from Black Monday II. The beaches in Kanagawa were moderately busy with seasonal bars selling dubious quality cocktails and equally dubious food with the kids playing in the soupy water. Ginza, however, was very quiet with tourists from Hong Kong to Mexico sweating it out in the handbag shops.

The tourist trade is possibly at its highest risk now and investors should be mindful of what traps are out there that could derail the summer fun from hostility towards inbound tourists, local tourists staying at home preferring Netflix to bedbugs eating everyone’s feet. For a month-by-month taster of this please read our ‘Observations’ pieces, July being the latest.

I fell into a Ring of Fire – Japan is the most seismically active country in the developed world and with the increasingly high standards of construction that have been in place since the devastating earthquake in Kobe in 1995, we feel relatively safe from buildings toppling in a temblor, though around the coasts no one dismisses the tsunami risk or the chance of Mt. Fuji blowing it’s top. As the Japan Metrological Agency issues its first ever mega-quake alert and the Prime Minister cancels his trip to Kazakhstan, Uzbekistan and Mongolia to stay put if needed, we should be asking what the risks might really be?

Given it has happened before, like the stock market crash, we have a rough idea what it would look like and this I will discuss in a piece later in the week entitled ‘Ring of Fire’. If you would like to read it, please contact me.

Happy hunting,

Best,

Neil