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Japan's "9/11" and "Katrina" Moment !

For last one week Japan has been fighting with three calamities - biggest earthquake in recorded history followed by tsunami followed by nuclear plant possible meltdown. Japanese people have shown a great resolve, calm and solidarity with each other in these difficult times. We all world citizens are with Japanese people in their difficult times. While Japanese people are showing great resolve, Japanese politicians and Tokyo Electric Company are failing them by not able to get control on nuclear reactor fiasco. This is typical due to slow response to crisis by government and corporates. I hope they do not repeat the mistakes of real estate bubble crisis from which Japan is still recovering after 2 decades. Japan's government had a chance to rise to the occasion and handle their "Katrina" and "9/11" moments. The response till now seems to be below expectations.

This triple whammy along with troubles in Middle-East and European debt was too much for markets to handle and as expected we saw one of the most volatile week in markets exactly after 2 years when it reached "devil's low (S&P at 666)". Thanks to Fed's comments and co-ordinated response by G-7 countries to halt yen's rise, markets started coming back to normalcy. Q1 end is 2 weeks away and everyone would be watching Q1 results closely in Apr. So expect to continue this volatility all during Mar, Apr and May.

After second stress tests, Fed has allowed banks to start raising dividends. This means that banks are back in action and could be good stocks for next 12-24 months. Here are some recommendations:

  • BAC at $14
  • FAS at $28 (extremely aggressive so be careful)
  • WFC at $30
  • HBAN at $6.6

Cricket World Cup is entering into knockout phase. With Pakistan beating Australia, knockout phase has become interesting and most likely India would face Australia in quarter-finals. We would have preferred to face any other team but Australia in quarter-finals. But if India wants to win WC, it needs to start showing resolve that they can beat any team including Australia.

Good luck India for cricket WC knockout phase !

/Shyam


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