One can see why investors are lapping up Japanese stocks, while they remain leery on Middle East. There has been encouraging words about Japan’s recovery from none other than Warren Buffett:

It will take some time to rebuild, but it will not change the economic future of Japan…Frequently, something out of the blue like this, an extraordinary event, really creates a buying opportunity. I have seen that happen in the United States, I have seen that happen around the world. I don’t think Japan will be an exception.

Natural disasters are not predictable, but human responses to them are, when a stable government is at the helm. And Japan is not the third largest economy for nothing. I agree with the investors that Japan’s massive rebuilding effort will spur rapid economic growth.

By contrast, although geopolitical turmoil in the Middle East could have been predicted, the outcome remains unknown, especially if it leads to regime change as in Egypt. No one knows how the new government would function. So it makes investing sense to tweak your foreign holding, at least for short term.

Things are different in the Internet-era globalized economy today, and rarely there had been so many international incidents occurring in such rapid succession.

In a matter of weeks, Egypt overturned its 32-yr old regime, which in turn fueled civil unrest in Bahrain, Yemen, Libya, Syria and even Saudi Arabia. Then came the devastating double punch of earthquake and tsunami in Japan. And before the dust settled there, USA and its NATO allies began bombing Libya.

Considering Japan’s status as the world’s third largest economy, and America’s dependence on Middle East’s oil supply, little wonder US market feels the strain of such global uncertainty, especially when the economy is on a slow rebound from one of the worst recessions in history. And this may continue for a while, as this CNN Money article muses.

How does an economist define a recession? According to Wikipedia a recession happens when a decline in the country’s GDP (gross domestic product), or negative real economic growth, continues for two or more consecutive quarters.

Buffett says “people are already feeling the effect” of recession, and how true he is! If you do regular chores, like buying grocery or gas for your car, you know this is mighty tough time we are going through. But well, if there is one thing we learned from economic history, tough times never last.