Tuesday, March 22, 2011

The Mind of A Contrarian

From Bloomberg:

Warren Buffett, whose Berkshire Hathaway Inc. (BRK/A) has a bullish derivative bet on Japan’s benchmark stock index, said the country’s record earthquake created a buying opportunity for equity investors.

“If I owned Japanese stocks, I would certainly not be selling them because of the events of the past 10 days or so,” said Buffett, speaking to reporters in the South Korean city of Daegu. “Something out of the blue like this, an extraordinary event, really creates a buying opportunity.”

The March 11 quake and tsunami, which caused the worst nuclear disaster in 25 years, may result in losses of $200 billion to $300 billion, with most of the costs uninsured, according to Risk Management Solutions Inc. Japan’s Nikkei 225 Stock Average has declined 12 percent since March 10. Markets in the nation are closed today for a public holiday. The iShares MSCI Japan Index Fund (EWJ), an exchange-traded fund that tracks the country’s stocks, gained 2.6 percent at 1:24 p.m. in New York.

Buffet isn't the only one who's noticed this is a good time to buy Japanese stocks.
Marketbeat notes that Capital Economists David Madani agrees, along with a recent cover story on Barron's.

I realize these statements seem cold and calculating, but they bring up a good point about when and how to invest. Ideally, the best time to buy is when everyone is selling and sell when everyone else is buying.

Here's a chart of the EWJ ETF which has already bounced back nearly 14% since the earthquake bottom: