Don't Panic! (easier said than done!)

FTSE 100 @ 5695.28, -79.96 (-1.38%)

- also down 6.5% on the 33 month high of 6091 attained in February.

FTSE 100 Chart (courtesy of Digitallook)
Double click to enlarge then back button to return.

Very unsettling times with turmoil in the Middle East and the tragedy that followed the Japanese earthquake last week. 
Markets have reacted much as expected with a lot of funds being withdrawn from the Nikkei which has seen the Japanese index fall 11% today and record its most dramatic 2 day fall since October 1987 as the expectation that Japan will relapse into recession crystallises.
Japanese companies, particularly insurers, are also assumed to be "repatriating" funds from foreign markets in anticipation of the rebuilding costs to come which have led to various estimates up to £116bn (Barclays Capital).
There is also fallout in the increasingly negative sentiment that surrounds many of the current and future Nuclear projects, and the alternative energy sector seems to be benefiting.
Its probable that alternative energy is still some way from being commercially viable on a large scale (and acceptable to the NIMBY's(Not In My Back Yard)), and that further lessons and solutions will be developed and built into new Nuclear projects.
It is something that I would feel better saying that we could do without but the reality is different.


Elsewhere:
- Oil prices go up - oil company shares go down;
- Oil prices go down - oil company shares go down!
a lose - lose situation if ever I saw one. I appreciate that the Middle East situation is a long way from being resolved but there seems to be no tolerance and accommodation of oil companies in the current climate. Will they really not be able to grow profits in the future!


Energy prices are also factored to rise sharply: as the Middle East unrest affects oil price and supply; and gas/LNG prices increase with expected auction bidding from Japan as it seeks to restore power in the wake of the escalating situation.


The interrupted supply of key consumer products from the Japanese export monster are also expected to affect the wider global economy in some way. In addition, global supply chains could also be impacted e.g Japan has increased its presence in Aerospace manufacturing in the last few years through MHI; KHI etc.


European sovereign debt has also raised its head again in the last week leading to further rule changes increasing available support from the EU bail out funds.


Following the tsunami, the loss of life is incredible as are the unimaginable human tragedies that  are revealed as stories unfold. 
More than half of a town's population of 17,000 missing, presumed dead! 
Even the relief at lives saved is tempered by the fact that families have been literally riven apart by the Tsunami waves. 
But, human nature being what it is, life will go on, things will improve and Japan will rebuild creating its own mini boom.


However much we may want them to, markets will not move up in a straight line. They don't always react with sympathy either but do reflect mass sentiment whether it be logical or illogical. 


The majority of shares are falling and some seem to be being unfairly punished having very little to link them to any of the issues identified thus demonstrating the fear that the majority are feeling stoked up by the media and other stakeholders in the short term here and now.


The bears and lemmings are ruling the markets at present but, the trend from the troughs of the credit crunch is still upwards and might benefit from some consolidation.
That being the case, I am not about to sell-out of anything in the virtual portfolio (unless it has already been short-listed e.g. Invesco Perpetual) instead, in the spirit of human resilience, I will keep taking the dividends (or the tablets), and keep an eye on a shortlist of shares that could present themselves as buying opportunities in the days and weeks ahead. 
Some shares do become oversold in these times of turmoil so it can be the right time to be selective and buy quality earnings (if you can find them!).
My objective is still to build a long term hold portfolio with gains and dividends that will accommodate these setbacks whilst delivering year on year returns!


Wish me luck!