Japan is a Tragedy, But Not For Your Portfolio
Monday's sell-off was all about one thing: the tragic earthquake in Japan, Cramer said.
At a certain point, investors will have to act as though Japan's tragedy is baked into the market, Cramer said, and will have to envision what the "strong people and government in Japan will do in response to this tragedy."
But you don’t even need to believe in Japan to be positive here, he said.
"What happened in Japan is a tragedy, no question, but the response and recovery might end up strengthening their economy," Cramer said. "For example, Japan has a massive power shortage... To rebuild power they'll need gigantic amounts of materials and earth-moving equipment and cranes. In the interim, they'll need Diesel generators to provide power for emergency situations.
"In short, who makes that? That's Caterpillar, which is why this stock was up today," Cramer said. "Almost every single element of CAT’s production lineup will be boosted by this earthquake and tsunami. And I would predict they have to do a gigantic amount of hiring to meet this demand."
Japan will also need contractors to rebuild, Cramer said.
"There are many contractors worldwide, but my favorite here is Fluor, which has a big office in Tokyo and is one of the companies with the rare breadth of knowledge to build power plants of all kinds, although it’s not a builder of nukes like a Shaw Group, but I don’t see the Japanese building many new nuclear plants after this crisis," Cramer said.
They’re also going to need a gigantic amount of copper and aluminum in order to rebuild electric power liners and provide the materials for new turbines.
"Aluminum, that’s Alcoa, which has a lot of exposure to turbines, a bad business for them so far and I think that's going to pick up as Japan begins to rebuild," Cramer said. "All of these are simply microcosms of what happens when a country basically goes off line and has to start over again."
In the meantime, as we wait for the rebuild, the Japanese will be burning a whole lot less oil short term because there's no place to refine it, Cramer said.
"That’s why oil prices fell today despite the protests in Bahrain, which seem more serious than the Saudi Days of Rage," he said. "Remember, the U.S. sixth fleet is based out of Bahrain, so that regime isn’t going anywhere despite what looks like an expansion of the cold war between Iran and the U.S."
Put it all together and the tragedy in Japan should trigger a resurgence of worldwide economic activity, and it couldn’t have happened at a better time given that demand from China has been slackening.
The bottom line: there’s just too much good happening economically in the wake of the terrible, horrible loss of life in Japan, a great country and a great ally, Cramer said. "That’s why I’m a buyer here, not a seller, and you should be, too."
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