Curtis Freeze, founder of Honolulu-based Prospect Asset Management Inc., which manages $280 million and has been investing in Japan for more than two decades, comments on Japan’s strongest earthquake on record and the social and economic impact on the country.
On market reaction:
“I don’t think the market is going to trade much at all, meaning that it will be very illiquid. People are not thinking about the market or about the stocks -- they have other things to worry about. The real reaction is everyone backs away. I don’t think anyone will see this as a short-term opportunity.
“The focus will be not so much on the market, but more on the suffering, on the people missing and taking care of a lot of people being hurt.
“Economic activity will be depressed for a month or so. The only people you see in the streets of Tokyo now are people buying groceries and stacking up anything that they need to stay home. Economic activities have been cut off. People feel much safer staying home and this will continue for a month or so. You don’t feel like going out and having a good time when people are in pain. Economic activity will go down.
“The whole country is in mourning and it is very similar to the Kobe earthquake and it won’t recover for at least three months.”
On the possible long-term effect:
“Over the next three months or so, things will get worse before they get better. Over the longer-term, it could be that demand will increase -- demand for rebuilding. If you take out the excess capacity, it makes it easier for Japanese demand that has struggled with excess capacity. So, prices will go up on the back of a lack of excess capacity, but it’s hard to talk in this terms when people are dying.”
On the nuclear situation:
Tokyo Electric Power Co., also known as Tepco, confirmed a third explosion today at its Fukushima Dai-Ichi nuclear plant north of Tokyo, damaged by the March 11 earthquake and tsunami.
“There are enough independent agencies monitoring any kind of radioactivity situation in addition to the government. The alternative source of information is out there and that would let us know the truth. There is no conspiracy, but there is a lot of confusion, and there is a big difference between conspiracy and confusion.”
On impact on Tokyo Electric and insurers:
“Any costs of Tepco will be shouldered by the Japanese consumers -- eventually, it’s not a cost for Tepco.
“The same goes to the insurance companies. Of course, there is a short-term pain in that premiums will go up, but it’s the consumers that will pay as well. It will all get passed on. There are all in the same boat -- it’s not like one company made a mistake and that company is going to take responsibility for everything.”