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Goldman's Magnum Opus On The Economic Impact From Japan's Earthquake
Goldman's Dominic Wilson has just released his magnum opus analysis on the situation in Japan and its aftermath. Unlike the lunatic drivel disseminated each and every week by GSAM's Jim O'Neill, which would interpret the imminent collapse of the Earth into a neutron star as the most bullish event in the (soon to be over) history of mankind, this report is actually one of more biased we have read from the Goldman strategists. That said, the natural bias to spin everything in a positive light still dominates the report (to which we retort: why not just blow up unpopulated pieces of America and rebuild them over and over: it does miracles for the Chinese "GDP" - it should work just as well in the US - plus Krugman would be in a constant state of Keynesian extasy). We obviously disagree: never before has there been the added precedent of nuclear fallout, or a pyschological intangible, to the mostly superficial infrastructural repairs that have to be undertaken. Goldman does acknowledge this as follows: "The ongoing nuclear risk at Fukushima has the potential to magnify the impact in other ways, although at the time of writing these risks seem to be fading." Based on what? Manipulated data reporting out of Japan, TEPCO and everyone else who is either guilty of strategic mismanagement, or is desperate to avoid a worldwide panic. It is this type of rushing to conclusions based on a complete lack of facts, that drives objective market observers furious with blind rage at the idiocy of the authors (and yes, "idiots" is what Sean Corrigan called all those who only see the upside in the Japanese catastrophe and ignore the massive human, economic and financial downside). Yet for all those who can bottle their rage for 15 minutes, we recommend reading the enclosed report as it is the very best that the Kool Aid crowd can serve at this point. Which, when applying some common sense, is not very much.
From Goldman Sachs
The Economic Impact of Japan’s Earthquake
As markets assess the impact of the recent tragic earthquake and tsunami in Japan, we attempt to place this issue into a broader perspective. While there can be no perfect analogue in such a disaster, studying previous ones may provide a sense of the probability distribution around the macro and market impacts of such events, and their trajectory.
Natural disasters tend to result in a strong contemporaneous reduction in average GDP growth followed by a quick rebound in the following quarter. Even in the case of very large disasters (in a ‘global’ rather than ‘local’ sense), the impact on economic growth fades quickly from the data, in part because in most (but not all) cases the boost from government spending offsets the fall in activity in other parts of the economy. The impact in asset markets has generally been more muted than the economic impact.
That said, the impact of the East-Japan earthquake and tsunami may be greater. This is likely to be one of the most costly disasters in global GDP terms; the ongoing nuclear risk has the potential to magnify the impact in other ways; power disruptions could last longer than normal; and supply chain disruptions may be an issue. While our Japan forecasts are under review, we are not planning any significant changes to our global forecasts.
From a global markets perspective, the broader macro context is important, and at the margin, positive. The Middle East crisis remains a key source of uncertainty. But data is likely to confirm global cyclical strength, European sovereign risks have calmed a little, and there are tentative signs that the most intense EM tightening phase may pass.
We extend our deepest sympathy to all those whose lives have been affected by the recent East-Japan earthquake.
As markets assess the impact of the recent catastrophic East-Japan earthquake and tsunami, in this week’s commentary we try to place this issue into a broader perspective. While there can be no perfect analogue in such a disaster, studying previous large disasters may help to gain a sense of the probability distribution around the macro and market impacts of such events, and their trajectory.
Natural Disasters in History
We have focused on three types of disasters (earthquakes, floods and storms) that are similar in nature: exogenous shocks with immediate destructive impact. We obtained disaster data from the EM-DAT International Disaster Database provided by the Centre for Research on the Epidemiology of Disasters (CRED). Over 6,612 disasters of these types have occurred since 1980, so we narrowed our sample by focusing on those in which the estimated direct economic damage (to buildings, production facilities, etc.) was greater than 1% of the preceding year’s GDP. We also eliminated disasters in countries without sufficient macroeconomic data available during the crisis period. This leaves us with a sample of 40 disasters in 23 different countries, nine of which occurred in the developed world (DM) and the remaining 31 in emerging market (EM) countries. Some familiar recent disasters in this group include the Hanshin earthquake in Kobe, Japan (1995), Hurricane Katrina in the US (2005), and the Indonesian earthquake and tsunami (2004).
Earthquakes are by far the most destructive in terms of both human impact and direct economic damage. The human impact is much larger in natural disasters in EMs, where nearly three times as many people are affected. But the direct property damage (relative to GDP) is much larger in the developed world, likely because there is a more valuable capital stock already in place when disasters strike. Table 1 contains some basic summary statistics about the magnitude of these crises, as measured by the estimated property damage and the number of people affected and/or killed by the disaster.
A Short-Lived Hit to Growth on Average
In order to explore the short-term economic impact of a large-scale natural disaster, we looked at quarterly and (where available) monthly data for a range of economic and market variables. Looking at averages does, of course, mask a great deal of variation, but some clear lessons still apply.
Turning first to GDP, we find two main results:
- Natural disasters result in a strong contemporaneous reduction in average GDP growth followed by a quick rebound in the following quarter. Sequential growth is reduced by an average of approximately 3ppts (annualised) in the quarter in which the disaster occurs, although this result is driven mainly by EMs. Output falls by an average of 0.55ppts below its pre-disaster trend before rebounding nearly all the way back in the next quarter.
- More destructive disasters produce a larger hit to growth. The size of the one-quarter hit to growth is strongly and negatively correlated with the size of the natural disaster on all three of the measures presented in Table 1.
The short-lived impact on economic activity is also confirmed by a range of other variables and is consistent with recent academic studies. Sequential IP growth falls sharply in the disaster month but then rebounds in the subsequent month. Export and import growth also both fall, in line with the overall reduction in output growth, before recovering in the next quarter. Investment growth dips but then accelerates strongly in the next 1-2 quarters, which suggests that the rebuilding of destroyed capital stock is an important component of post-disaster GDP resilience.
Policy rates tend to be reduced marginally on average, although this response generally is delayed until a few months after the disaster and there is a large degree of variation across cases. Equity returns dip in the month of the disaster but remain firmly in positive territory (at around 1%mom non-annualised on average), and then rebound sharply in the next month. Disasters have historically had a negligible impact on average on the short-term dynamics of inflation, government budget deficits and either nominal or real TWI exchange rates.
The Largest Global Disasters Tell a Similar Story
In addition to the lessons from the aggregate sample of disasters considered above, it is also helpful to look more closely at some of the globally most expensive disasters in recent history—since they are likely to provide the closest analogue to the East-Japan earthquake and tsunami. We sorted our sample of disasters by the estimated damage as a percentage of global (rather than local) GDP and, on this basis, the big five in descending order are the Hanshin (Kobe) earthquake of January 1995, Hurricane Katrina in August and September 2005, the Irpinia earthquake in Southern Italy in November 1980, the Sichuan earthquake in China in May 2008 and the earthquake in Los Angeles in 1994. The damage in each of these disasters exceeded a tenth of a percent of global GDP in that year (see Table 2). Restricting the sample in this way results in a sample biased towards the large advanced economies (with the exception of China in 2008). On the other hand, these are not among the most severe disasters within the context of local GDP, as Table 2 also shows.
The conclusions from looking at these big five disasters are qualitatively very similar to the results of the full sample. But the scale of economic and market moves in these cases may provide a better reference point for the East-Japan earthquake compared with the EM-heavy sample analysed above:
- Even in the case of these large disasters in a ‘global’ rather than ‘local’ sense, the impact on economic growth fades quickly from the data. Notwithstanding the intense human and social costs of such large global disasters, the economic cost barely registers in quarterly economic data. In all four cases with available data, GDP growth was positive in the quarter in which the disaster happened. Output subsequently returned to its pre-disaster trend within one quarter, with the exception of the Chinese Sichuan earthquake of 2008 (although this likely reflects the concurrent global downturn).
- The impact of the disaster is more clearly discernible in monthly activity data. Industrial production is the most reliably available across countries and over time. In the case of the Hanshin earthquake in Kobe, Japanese industrial production fell -2.6% mom in January 1995, but positive growth (+2.2%) was restored in the very next month. For the three months after the January earthquake, IP growth in Japan averaged 1.5%mom, double the average of the three months prior to the earthquake. And industrial production was above pre-earthquake levels within two months, by the end of March. In the case of Hurricane Katrina in 2005, IP growth was flat in August and down -2% in September, but growth was positive in October, and the pre-hurricane level of industrial production was surpassed by the end of November. The other three episodes were even less impactful: IP growth dipped to 0.5%mom in the month after the LA earthquake, and was low but positive in the months of the China and Southern Italy earthquake. Of course, the economic impact is greater if one zooms in on the region most directly affected by the natural disaster. For example, large-scale retail sales in the Hyogo and Osaka area fell sharply over the January-March 1995 period (-6.7%yoy, -3.4%yoy and -1.7%yoy). But even here, there was positive growth by April, and after drifting sideways for much of the rest of the year, large-scale retail sales rebounded strongly in January-March 1996.
- Part of the reason that growth recovered quickly is that in most (but not all) cases, the boost from government spending offsets the fall in activity in other parts of the economy. In three of the five large episodes—the Hanshin Earthquake, the Southern Italian earthquake and Hurricane Katrina—government spending grew strongly in the quarter when the natural disaster occurred or in the quarter just after. The contrast is especially clear in the case of the Hanshin earthquake in Japan. In 1995Q1, real GDP grew 0.8%qoq, within which both private consumption and investment spending fell, but government spending increased by 2.8%qoq.
- From a markets perspective, the impact has generally been even more muted than the economic impact. We only find a clear impact on equities in the largest disasters, the Hanshin earthquake and Hurricane Katrina, and in general there are few if any persistent moves in rates and FX markets. In the case of the Hanshin earthquake, the Nikkei 225 fell about 8% in the week following the disaster, but it soon rebounded and had recovered more than half its losses in the week thereafter. Bond yields (and the Yen) barely moved over this period, and continued a sustained downtrend, largely owing to the gradual economic slowdown in the quarters thereafter.
Key Differences with the East-Japan Earthquake
The evidence from historical disasters is helpful to gain a sense of the probability distribution around possible economic outcomes and their likely trajectory. But there are unique features of the East-Japan earthquake and tsunami currently, most of which suggest that the impact may be greater. We highlight five key points:
- Even as the full extent of the damage in the East-Japan earthquake and tsunami is being assessed, it is already clear that this is likely be one of the most costly disasters in global GDP terms. According to the estimates by our Japan economics team, the total damage will be about ¥16trn, or around 1.6 times greater than the Hanshin earthquake, which was the most costly disaster before this in our sample.
- The ongoing nuclear risk at Fukushima has the potential to magnify the impact in other ways, although at the time of writing these risks seem to be fading. A significant nuclear risk event, apart from the negative impact in the immediate affected area, is likely to affect consumer sentiment more broadly in Japan and potentially in other countries too. So the second round of economic impact from these types of developments could be significant. The nuclear dimension has also added a channel for international contagion as countries such as Germany have accelerated the shutdown and review of certain ageing nuclear power plants, putting more pressure on gas and oil prices, with the consequent deleterious effects on growth.
- A prolonged disruption to the power network in Japan is a significant risk to Japanese growth and a material difference from many previous large disasters where power disruptions were mostly limited and local. The situation is evolving daily but damage from the earthquake has caused a shutdown of about 10%-12% of power station capacity throughout Japan. If power outages do not extend beyond end-April (our current base case), then after a contraction in 2011Q2, we expect +2% growth in Q3—a pattern not dissimilar to the historical evidence. However, if in a worst-case scenario, power disruption persists into late summer or even to end-December, our Japan economists estimate that GDP could decline until the end of the year.
- Although the affected regions are somewhat further removed from Japan’s industrial heartland relative to the Hanshin earthquake, the fact that Japan is such a key part of the global industrial supply chain means that disruptions in specific industries and output could be material. Our equity analysts believe that sectors where there is likely to be a significant impact on sales include semiconductors, cellphones, digital cameras, petrochemicals and autos, whereas they see a relatively smaller impact on the machinery and steel sectors (Assessing earthquake impact risk on production in key industries, Shin Horie, March 21, 2011). Mike Buchanan and team have combined this micro industry level data with country trade linkages and see modest downside risks to growth in Singapore, Taiwan, Thailand, the Philippines and Korea, but little impact on China or India. A key mitigating factor is that in many industries inventories are sufficient to meet component demand for around six weeks. Still, disruption that lasts much longer will mean more risks of a kind that a purely ‘macro’ perspective may miss.
- Lastly, part of the reason why the typical economic growth impact from natural disasters is fairly short-lived is the offsetting boost from government spending. We expect this offset this time around too. Chiwoong Lee’s latest note (Japan Economic Morning Pitch: ‘Financing Earthquake Reconstruction Still Uncertain’, March 22) lays out some of the options currently being considered in the media: (i) using the FY2010 and FY2011 emergency funds (¥1.2trn together), (ii) revising the FY2011 DPJ manifesto (¥3.3trn in total), and (iii) using government reserves (¥2.5trn). What cannot be covered by these sources will require increased issuance of new JGBs, but the scope for policy flexibility is more restricted today at least relative to the 1995 Hanshin earthquake. In 1995, interest rates were still above 3% and the size of the fiscal deficit was smaller (92% of GDP) than it is today (221% GDP). Japanese financial conditions have tightened since the earthquake, though the joint intervention on the JPY by major central banks has provided an important interruption to that dynamic.
Our Japanese forecasts are currently under review, although the key uncertainty around the growth picture centres around the longevity and magnitude of power disruptions. Reflecting the downside risks to earnings, Kathy Matsui and our Asian Portfolio Strategy team have already shaved 12% off their FY2012 earnings estimate for Japan’s equity markets, and we now expect returns here to be more back-loaded.
At this stage, we are not planning any significant revisions to growth forecasts outside Japan, although any changes there would mechanically influence the global forecast. The impact through export channels from temporarily lower Japanese demand is likely to be relatively small, even in non-Japan Asia where the linkages are tightest. And the other main source of transmission—through global financial conditions—is so far not registering as significant.
From a Global Markets Perspective, the Broader Macro Context is Mostly Constructive
While the earthquake has dominated headlines, it is important to keep an eye on other key developments that have occurred over the last two weeks in assessing the broader context in which these impacts are playing out.
Alongside the Japanese disaster, the other source of ‘headline’ risk for markets in recent weeks has come from developments in the Middle East. Here too, we have seen significant news lately. Gulf forces have entered Bahrain and protests continue both there and in Yemen. In addition, a UN Security Council resolution authorising a no-fly zone and escalating sanctions against Libya have already resulted in military strikes against government forces. In both cases, this could set the stage for greater stability in the region. But it is still difficult to be sure exactly what paths the regional crisis will take and interventions so far do not provide a decisive resolution. This is therefore a source of uncertainty that may remain with us even if concerns over the consequences of the Japanese earthquake subside.
The major transmission to the broader outlook remains through oil supply disruptions. We have had a structural view that oil prices are likely to be under upward pressure in 2011. For this reason, we have generally sought out energy exposure, directly and within equities and FX. Disruptions to nuclear capacity in Japan may ultimately reinforce those structural pressures. But our central forecast remains that the upward trend in oil prices will not prove to be a binding constraint on growth. That said, further supply shocks would certainly see fresh spikes in oil prices given low inventory buffers, so we remain vigilant about this source of risk. Our ‘oil-adjusted’ Financial Conditions Index in the US—a simple way of weighting the impact of financial conditions and oil prices on growth—tightened significantly in late February but has so far been fairly stable in March.
Beyond the Middle East, three other developments that are high on our radar screens look a little more benign. The first is the broader cyclical landscape. Last week's Philly Fed release was extremely strong and, as we move through the most macro-intensive part of the calendar, we expect the bulk of the data to reinforce a message of robust underlying growth. While the literal tracking of US GDP growth has been a little softer than our current forecast, the survey data are consistent with stronger underlying growth, so we will likely see some reacceleration in Q2. As we have shown recently (and as displayed in Chart 6), because the growth recovery has been the major story behind the rally since the end of August, the market has generally performed better in the data-intensive part of the month (between the Philly Fed and payrolls), with losses on average outside that period. If our positive growth view is borne out, this pattern could continue, as so far in March.
The second development that has been pushed off the headlines but that we expect to return this week is the continuing push for further measures to calm sovereign fears in Europe. The March 9 European Council meeting was, as we said at the time, a somewhat mixed result that has left many details still to be hammered out. But the fact that a deal was reached early was positive at the margin, as was the upsizing of the European Financial Stability Facility (EFSF) funding and the renegotiation of Greek borrowing terms, even if progress on Portugal and Ireland was more disappointing. And with little fanfare, we have seen Spanish and Italian spreads tighten meaningfully, the latter to levels not seen since last August.
This week’s EU summit on Thursday and Friday is expected to ratify those decisions, but expectations for any fresh developments beyond that are low. The risk is that markets will focus once again on what has not yet been resolved and the vagueness of the future structure of penalties for fiscal lapses. But, as Francesco Garzarelli has argued in the past, there is ‘endogenous risk’ in the Euro-zone crisis and the relaxation seen lately in European credit markets may itself have lowered the risk that this issue becomes a source of greater shocks for the market in the next few months.
Finally, we continue to watch the EM tightening dynamic closely. Since early November, inflation pressures and tightening responses in China and more broadly across EM have kept us away from EM equity assets, despite a relatively constructive medium-term view. We have argued in several places before that while the sharp underperformance of EM equities since then is leading us to ‘warm up’ to the asset class, some key ingredients of a more positive view have so far been absent—such as signs that the peak in the tightening cycles is at hand, easing of sequential inflation pressure and more concrete signs of slower growth.
While we still do not have clear evidence that these conditions have been met, we may be moving further down that road. The past few weeks have provided evidence that China’s economy is slowing, suggesting that the tightening that our Financial Conditions Index has been signalling may be starting to bite. More intriguing is the break in the upward trend in agricultural prices, which Themos Fiotakis discussed in a Global Markets Daily last week, with recent market damage reinforcing a drop in global agricultural prices that had begun on the first evidence of modest inventory builds. Damien Courvalin continues to remind us that March 31 is the first real news day for the new crop and that, while high prices should incentivise a supply response, the crop outlook will not be clear until well into the summer, with substantial fragility to sub-par weather given low inventory buffers. But with ‘normal’ weather, crop prices are likely to fall and the inflationary impulse from food prices may be peaking for now. If that dynamic continues, it would greatly add to the attractiveness of EM equity positions. And while it is early to be drawing any firm conclusion here, we think the market is paying too little attention to this dynamic.
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Any updated reactor temps to give out? I've been waiting for those all day, and all I hear about is Obama and his brother Ghadaffi. C'mon Tyler, don't be slipping.
This link has some updates on pool and reactor temps.
http://www3.nhk.or.jp/nhkworld/
And back here in the States, the "dredging mud" slick has been identified by some intrepid citizens, and not the U.S.C.G, to be... wait for it...
OIL
http://www.huffingtonpost.com/rocky-kistner/one-gulf-oil-spill-source_b_...
Yea, like totally.
Anglo-Suisse Offshore Partners
Following quote from the HuffPo article must be them copping a whocouldanode plea.
"Anglo Suisse Offshore Partners released a statement last night confirming it was the source of the spill, but that it was "surprised" that its dormant well could have released that much oil, according to the paper."
For some unknown reason, ZeroHedge seems to think that these reports are published by a legit outfit, either that, or ZH is getting paid to publish them. Whatev. In any event Mister Blankfein testified in federal court today about a GoldmanSachs Board member who may have been involved in insider trading. What I found interesting is that Blankfein would not testify without an order from the Court that questions about other Goldman investigations are off limits.
The Goldman chief agreed to testify after Rajaratnam’s lawyers said they would not dredge up pending investigations into Goldman as part of their cross examination of the bank chief.
http://www.nypost.com/p/news/business/goldman_sachs_ceo_testifies_at_galleon_hmYdfEH2RJKveRXHFv4s6K#ixzz1HTnq9Zkteveryone would plead the 5th if it wasn't for testimonial immunity. it is standard.
Is this a 'Guest Post'? Are you sure this is NOT a 'Guest Post'?
Why would we be tracking Goldiman so closely? Why not track someone/some company with an ORGANIC winning record?
Thanks,
~Judge Judy
i admit, this does raise a few questions, and the thank you is so...juridicial, too, JJ.
when i read tyler's intro, i thought: oh shit! he's hangin outa his picture frame here! he's stompin about like an alpha baboon with an inflamed ass! this is felony roid rage. vit. B12 to both cheeks, here, and 50cc'z of prepH directly to the bullseye, quick. ly.
editorial aplomb doing a cannonball off a 4-storey parking structure into an oildrum of slime, here, tyler!
then, as i read the "report", i began to understand the inflammation of his angst, as my B.P. shot up like a thermocouple reading in #2 during off-line fusion.
when i got to: "We obtained disaster data from the EM-DAT International Disaster Database provided by the Centre for Research on the Epidemiology of Disasters (CRED)," blood started pulsing outa my #3, thru my Calvin Kleinz, and i babooned my sweatpantz, too.
so, i'm gonna hit "Save", pop a vike, and hop in a nice, hot, bath.
later, JJ. see ya, tyler.
slewie out.
Yes, message to the night crew: take care to re-read before you post a blog entry. "Ecstasy." "Less" biased, not more. Don't worry guys, your secret's safe with me
Government spending to the rescue again. If I didn't know better I would say the world is terminally addicted to government spending and printing. But of course I do know better because the MSM tells me hourly that everything is coming up roses.
http://www.youtube.com/watch?v=s62MrU8mHx4
Ethel Merman, eat your heart out.
Brother Cog,
I'm not sure "the world" is addicted to government spending. It is very clear that the criminal syndicate known as Wall Street is terminally sick with it. And why not? It is the only capital available to the corrupt system to prop up their S&P futures positions. That free money is all that stands between them, a massive market correction, and the liquidation of assets just off to the side of their balance sheets. Oh, the syndicate is counting on the government spending.
I think it is also true that current members of our federal and state governments, who are also Marxists in their tendencies, are also terminally ill with government spending as the task of deciding where the government spending goes is the source of their power.
And you could also say that crony capitalists [most big business these days] are digging the endless government spending...as they have been writing themselves in to spending bills for years...oh, the largess.
But the world? I think the vast majority of the world is tired of government spending.
Additional:
Well...there is also the SEIU and its members...so............maybe you're right?
Brother Cdad,
I wish it were true that only our tormentors are addicted to government spending. Alas, when the cupboard grows bare and the car lay abandoned in the driveway for lack of money for gas or repairs, when the cable is turned off and the phone goes dead, only then shall we see if we the people don't also wish to suckle from the government teat.
Yum yum, chocolate milk for a change.
Brother Cog,
I hear you...and I am continuing to question my contradicting thought. However, there is still some part of me that believes that, if the lights went out, and the Internet was suddenly not easy to access, and folks had to revert back to rabbit ears, and they had to stop trading in their cars every other year...but instead maintain and fix them, and utilities started getting a little spotty...well, I still like to think that in what W. Gass called "The heart of the heart of the country"...life would quietly proceed however it had to.
Maybe it is because I live in the heart of the heart of the country, and it could be because I am currently studying goats[raising and butchering], and I know well how to can food, and I am happy to grow a garden, and I don't need 5 hp to clear the snow from my walkway...well, I think life will proceed however it needs to. And implied in what I am saying is the admission is that we will be learning to live with much, much less than we are currently accustomed to.
Oddly, my brother, I am rather looking forward to life with less. Say what you will.
your brother
I just thought I'd jump on and tell you and your friends to go to hell. You *are* the tormentors you lambaste: the bigoted, the selfish, the embittered armchair loser. The banksters you claim to hate are just more powerful versions of yourself.
You couldn't care less about the impoverished, those stricken by disaster, or the historically screwed-over populations. So why pretend to play activist? I'll answer that: because you need to validate your petty, vicious little life. You only see disaster and apocalypse because it provides an escape from your impotence. I pity you and all the other ZHers - the willfully ignorant regulars and the new Stormfront add-ons. You've got nothing but your own misdirected anger. It clouds what little analytical ability you have developed from each of your narrow experiences. Thus, you're simply talking to yourselves because you can imagine few options to improve your lives and/or your environments. Feel free to pass on the message and have a nice day.
that was hurtful :(
It'll be ok. Just pet a kitten and everything will be fine.
Get out troll trash!!
Death and destruction on a massive scale is always borne by the populace. What moronic theories.
It's all good:
http://enenews.com/nhk-at-7pm-et-smokesteam-rising-from-all-4-reactor-un...
reassuring to know the EPA is right on the job, TIS. how about a hidden clearinghouse where carbon credits can be traded for cesium and plutonium "credits", capitalized daily, and marked to market every 24,000 years?
i'm sure Homeland Security is writing crony contracts, or at least signing them and giving the to G/S for administration, securitization and default insurance, which has gotta be so underpriced right now that G/S is holding the long side of their new triple-lindy Radiological Contract Default Obligationz/Homeland off-balance sheet thru Maiden Loon, about which Buffet has never spoken with anyone. not one word. ever. trust me.
wait! what about OSHA? how can they allow legal, card carrying, contracted, migrant workerz to handle radioactive produce, fruit & nuts, and grapes? G/S has a new product line of human radiation level default swaps waiting to go. the japanese are kicking themselves for just arbitrarily changing the health rating for all the different rays and particles and isotopes and not even thinking that free markets could do this, and we could all bet on it, too! all while the primary dealers and their henchbanksters faded every penny of ours with push-button free money (to them) which we call "The National Debt".
i'd better stop now, b/c
a) my bath is ready.
b) i don't work for G/S and i'm not a ponzi shill, and
c) the rest of the story is even worse!
"Earthquakes are by far the most destructive in terms of both human impact and direct economic damage."
Earthquakes are 'natural' disasters. Reconstruction can begin immediately afterwards. Leaking reactors and nuclear contamination create a different dynamic. Rail and highway lines in Japan parallel the coast. How do you move goods and people when the roads and rail lines pass through irradiated lands? How do you clear debris that is contaminated with atomic dust? How do people get to work with Chief Cabinet Secretary tells them they must remain indoors when the wind blows their way?
No, I cannot bottle my rage for more than 15 minutes.
Hey junker, show yourself. Come on big guy. Show, or join the Cunt Club.
That introduction was hilarious. Giving us ten reasons to reject the report on it's most fundamental thesis/biases.....
I find the rush to analyse weird, painful almost. To what if any degree at all is the true impact of this Japanese disaster known, even locally, forget globally, that we are already ready to discuss GDP impacts, impact on commodities, reconstruction costs.... really boggles the mind.
A good trader would just understand when is a good time to hold and when is a god time to fold, in a space he/she is comfortable with. To even try to make a "play" in Fx or Commodities, especially of any paper variety, based on secious research is plain insane.
I say thsi with confidence because I've read Goldman reports on India, they are so full of bull, one can choke.
If your instincts are not honed enough, you will lose. This is shearing time.
ORI
http://aadivaahan.wordpress.com
When we have abandoned or just plain lost the ability to honestly look within for truth and knowledge, when we are complete strangers to ourselves and no longer posses the capacity to 'know' something without the need for external affirmation, we then desperately turn to poor substitutes from outside sources. This is why there is an increasingly desperate need to seek "'proof', 'truth' and 'facts" and always from those who are 'authorities', usually the very same authorities who lied to us in the first place.
Once we are completely lost in a world of distortions, lies and self deception, in other words insanity, we become obsessed with finding truth where none exists or could ever exist. Ultimately we revert to worshiping Golden Idols and false Gods as saviours of our lost and abandoned souls.
Looks like we're almost there.
+2 lying eyes.
ORI
Excellent post. I never let go of my core beliefs, they have never steered me wrong. I know what I know. I've gone against the mainstream often and keep my mouth shut while doing so....who wants their affirmation?
oops! ya forgot to keep yer mouth shut while going against them!
after the bogus conviction and the psych intake, tell 'em ya want Cellblock #9.
we have our own chaplain!
slewie--- i'm speaking about actual decisions made (seeking no affirmation), not my general opinion about them (which i do express)
Everything will be much clearer once you accept the holy father, Blankfein as your personal Lloyd and saviour. Come do God's work brother, and go in peace.
"When we have abandoned or just plain lost the ability to honestly look within for truth and knowledge, when we are complete strangers to ourselves and no longer posses the capacity to 'know' something without the need for external affirmation, we then desperately turn to poor substitutes from outside sources. This is why there is an increasingly desperate need to seek "'proof', 'truth' and 'facts" and always from those who are 'authorities', usually the very same authorities who lied to us in the first place.
Once we are completely lost in a world of distortions, lies and self deception, in other words insanity, we become obsessed with finding truth where none exists or could ever exist. Ultimately we revert to worshiping Golden Idols and false Gods as saviours of our lost and abandoned souls.
Looks like we're almost there."
I hate you right now. It will pass.
Yes, basically we are having a spiritual crisis. (NOTE: Not Religious).
The ability, as you said CD, to look within for truth. Not from some exteral authority or 'Guide'.
As the Kinks once wrote, 'If life is for living, What's Living for?'
What is the goal? The era of the Gordon Gekko's and 'He who has the most toys wins' Profit, Greed, and on and on.
Ultimately we revert to worshiping Golden Idols and false Gods as saviours of our lost and abandoned souls.
Exactly CD. Perfectly said.
I fear we will collectively have to bottom out like an addict without any more supply of hopium before we can start to 'Grow' again as a race.
We are so pathetic.
We're worshipping the wrong tablets.
"Unlike the lunatic drivel disseminated each and every week by GSAM's Jim O'Neill, which would interpret the imminent collapse of the Earth into a neutron star as the most bullish event in the (soon to be over) history of mankind" = lulz
Quake + Tsunami + nuclear reactors (already in meltdown) + Japan's 200% debt to GDP deathwish + Europe's bailout flop on Portugal and Spain (Japan won't buffer buy EZ debt + China property market imploding = Total FUBAR.
Japan is leading the global economy into the endgame.
Any crack up boom from reconstruction will be offset with oil and food spikes. Millions of Japanese who can't afford food and fuel.
actually chump, Quake + Tsunami + nuclear reactors (already in meltdown) + Japan's 200% debt to GDP deathwish + Europe's bailout flop on Portugal and Spain (Japan won't buffer buy EZ debt + China property market imploding = 67 more points on the dow.
logic does not apply.
it would seem that way...but, china/US tensions will take a nasty turn once china turns of the UST tap.
China has an oil paranoia...bad one too
US markets should get the brutal correction that is long overdue.
well its all got to implode some day. taking much longer then i would have thought. my opinion is that equities will keep going up. price inflation food/energy. then some unknown exogenous shock hits, and its all over in the blink of the eye. the variables you mentioned preciously are certainly in play, but the way the world seems to work, it will be something we are not even capable imagining now.
hyperinflation and world war... we just don't know when.
YOU CANT HANDLE THE TRUTH!!
A Short-Lived Hit to Growth on Average
I stopped right there. NONE of the Keynsian stats tell us anything about the loss of savings.
"That said, the impact of the East-Japan earthquake and tsunami may be greater. This is likely to be one of the most costly disasters in global GDP terms; the ongoing nuclear risk has the potential to magnify the impact in other ways; power disruptions could last longer than normal; and supply chain disruptions may be an issue. While our Japan forecasts are under review, we are not planning any significant changes to our global forecasts."
...so we will just rule out any sort of Black Swan events, like Tokyo's water supply being made unfit to drink or a wind shift, etc. Swans have been known to arrive in flocks....
Dear Everybody at Goldman, please review the following:
http://en.wikipedia.org/wiki/Parable_of_the_broken_window
What's an avatar to do with some cash lying around right now? Already have 10% of NW in PM's. Serious question. I feel like a deer in the headlights. I am calling on the brilliant minds of the ZH community to direct me. Do I really need to go buy some farm and hunker down at this point, or...? Help this wandering Jew.
BTFD duh.
Yeah, I know. I hate to feed the machine, though. How about something tangible - outside the usual.
being that you live in the city, your options are limited. keeping a car around to get to your doomstead could be pretty steep. lots of options a few hours north though. at least keep some guns and ammo stored somewhere, again hard to do in the city.
i'm moving 30 min north myself next month. not b/c i'm trying to flee, the wifey moved offices; but i'm not gonna lie, will be nice to have more choices. the inlaws live way upstate, maybe i'll have a fighting chance to get out!
legal handgun ownsership, car and not having to keep the arsenal in storage gives me a warm fuzzy feeling.
I have the tools you speak of - I guess I just can't believe it's come to this and I don't want to make the leap. This is what keeps me frozen in a state of relative inaction. I feel like Charlton Heston staring at the Statue of Liberty right now (for all you planet of the apes fans).
Well, VI, having grown up on a street with bronx refugees (though i hail from brooklyn myself) from the crack wars of the early '80s, the sense of paranoia has always been with me...
give up any hope for humanity and be prepared for the worst. maybe nothing will happen at all, but if it does be ready.
Sage words. Thanks.
@Village Idiot
I would definitely acquire farmland if at all possible. Don't get to far from civilization, though. You could become an easy mark for local predators. In the deep woods, few can hear cries for help. BTW, still enjoying the mortgage you helped me with. :)
Thanks Cursive. Regarding the farmland - I keep hearing that the locals all see it as a "bubble ready to pop" so I do nothing because I don't want to overpay.
Ok, I'm ready to buy farmland. Where? I want a ZH home run recommendation. Make it a drive from so cal, if possible. Come on, you ZH bastards. I will host the 1st annual ZH "fest". Promise.
@Village Idiot
I'm down with the Zeropalooza, but I can't help you with so cal. If you want some good farmland, think east Texas, Louisiana, southwestern Arkansas or Mississippi. But, you could be a homesteader even in Los Angeles. Check this out:
http://offgridsurvival.com/urban-homesteading/
I'm renting so my landlord might get pissed about the backyard conversion. But our last home was on almost 3 acres and I never even thought about it. From the list you have there, do you have any particular pecking order?
edited
@Village Idiot
Sorry I didn't get back to you sooner. Hope you get this. I'm not sure which "list" you are referring to. I at first scoffed at many of the preppers in this county and I've slowly changed my opinion over the last 4 years. So, I'm pretty late to the table, but I do own 7 acres of raw land with a pond and I am trying to develop it into a workable orchard. Baby steps. Would I love to have some livestock? Sure, but I'm not ready. This fall I will be planting fruit trees. I'm doing whatever I can to lessen my dependance on distant markets. If a person can't do these things, I would suggest seeking out friends/relationships with others (i.e. being a good neighbor/friend) that could give that person access to these things. I hope that helps.
As I said before,
this is ultrabullish for big pharma doing chemotherapy and cancer treatments for 100-300k+ USD/patient years.
If they just keep all the noise and questions down it will just sneak in as higher cancer incidence, possibly worldwide.
Cant see it, cant feel it, just exploding cancer incidence.
Look for moonshots in big pharm stocks.
Coolio!
"in the (soon to be over) history of mankind"
Wow. this is even bearish by my standards holy fuck!
why not just blow up unpopulated pieces of America and rebuild them over and over: it does miracles for the Chinese "GDP" - it should work just as well in the US
aaaaaaaaahahaha..... I tell you. If I didn't have zerohedge for my daily laugh I might just go ahead and kill myself
If I could read and assimilate that report in fifteen minutes I'd probably be running some wildly successful web site or something.
This may start to look like the summer of 2008 when the world's largest economy was about to freeze. During the preceding eighteen months there were all sorts of claims how the US could slow and not hit the global growth numbers in a big way. Well now we have a credible threat to the world's third largest economy. The second largest economy is supposedly putting the brakes on as well. Got to keep on eye on this.
hence that "deer in the headlights" and "morning dread" feeling.
Our real story.. umm, rather dog & pony show. "God" will tell the public that Raj 'violated Goldman ethics. Pot meets kettle.
Berenzweig Says Defense Lawyers to `Tear' Into Blankfein
When I get advisory letters or dinner invitations with experts based on my brokerage account, they go un-openned into the trash.
This would be typical of the un read letters I automatically toss.
Their deepest sympathy? Banksters don't feel sympathy.
Seriously though, there is no doubt some smart people at GS I wonder if they genuinely fail to see they're echoing broken window fallacy and genuinely believe their will be mo major supply chain issues that affect their global outlook or are these reports merely what they want the public to believe?
after working with GS and other various banker sociopaths, as hard as it is to believe, they actually believe the shit they put out... for awhile. then they flip it on you, a la fabulous fab and engineer a product to blow up in their clients face.
the stupid bankers (lehman/BOA) actually totally believed the shit they were doing was the right move. they bought into their own greed driven delusions. "housing prices will never go down!!!" stupid fuckers.
The problem with gurus is that they drink their own urine for breakfast... then eventually expect you to also...
Don't believe a #uckin word they say.
Banksters don't have souls. You are jumping a few steps here.
So short term bad, but longer out good. But this time around there is no precedent.
We've never had a Fed Chair try to crash the dollar before on purpose.
on wires, Spanish bank downgrades coming, portugal/spain correlation nightmare beginning. EUR on pressure
GS still sounds reasonable compared to the admin.
http://nation.foxnews.com/fbi/2011/03/23/woman-tied-911-fannie-mae-obama...
Dominic states "While there can be no perfect analogue in such a disaster" and he is right. However, the disasters he does refer to are not even close. Perhaps he should consider the Chernobyl disaster or the 1920 Tokyo earthquake and tsunami. They would be more relevant than his samples. Then again, a review of these two disasters might ruin his whole thesis, so obviously, the outliers need to be removed from the sample population.
Where's Waldo
Why the void of news on the reactors? I read yesterday that the reactors were on a sea water spraying schedule (a few hours here and a few hours there). Is non stop sea water spraying too big a contamination problem or is it not needed? I can't find updates anywhere.
the void of news is b/c western economies decided to thrown up a smoke screen with this idiotic libya shit to distract the sheeple. put on MSM, fort 40 min on libya, 5 min on japan, 5 min on chris brown.
"From Goldman Sachs
The Economic Impact of Japan’s Earthquake"
...
Or in other words: "BTFD!!"
: )
Grow some lawn. It's the in thing. Appricot! I really need to load this aircraft.
"Half a league, half a league,
Half a league onward,
All in the valley of Death
Rode the six hundred.
'Forward, the Light Brigade!
Charge for the guns' he said:
Into the valley of Death
Rode the six hundred."
At least they fought...
http://en.wikipedia.org/wiki/Charge_of_the_Light_Brigade
I don't think anyone even looks at wealth and the economy the correct way anymore. Real wealth are things of value, like physical assets. You can't grow an economy by bulldozing a country. Rebuilding it brings you back to where you started.
"I don't think anyone even looks at wealth and the economy the correct way anymore."
That dude forgot a lot of stuff in his REPORT.
- Not only was this a strong earthquake it was a 9.0. HUGE These quakes have monstrous aftershocks that can be expected 8s and 7s and countless 6s.- The real issue however is the reactor issue. These lying bureaucrats are doing their country a major disservice. They've lied about the integrity of the reactor chamber, they've lied about the amount of damage, it's all been found out. However they keep giving rosy updates. Right. There have been neutron beams spotted. It's completely melted down. This was horrid enough at Chernobyl but Tokyo and it's suburbs are only a stones throw away. 40 MILLION PEOPLE. In the below report this guy keeps spouting numbers from regular Joe Earthquakes and Floods/etc. This ISN'T REGULAR JOE NIGHTMARE NATURAL EVENTS.
It may have been besides the size of the Quake but now it went NUCLEAR. They say their shipping in bottled water because the tap water is too much for infants to drink, let alone adults. Radioactive water has reached the ocean, might as well call off fishing season, forever. Green leafy vegetables are uneatable at this point. Where do they get their tea from? China or on Japan itself? Hmmmmmm HOW DO YOU QUICKLY BOTTLE ENOUGH WATER FOR 40-70 Milion people? LOL
-Economically speaking. Are you going to buy ANY JAPANESE GOODS? If you're looking at a Toyota wouldn't you go, hey KIA's at top rated right now anyways and I don't have to worry about contamination issues.... YET. Samsung/Toshiba/Hitachi/etc.... I'll buy USA or Korean. Radiation is EVERYWHERE NOW. Hell it's even hit Europe via NYC/DENVER/LA/HAWAII/ etc. The thing w/ radiation its distance and exposure time that are key. Unfortunately the biggest city in the World just got Radiated. And these FOOLS are telling everyone to buy buy buy. Right.
- The Youth of Japan would be best served to get the hell out of Dodge. Go live/study abroad, some where away for the LaserNeutronGreen Lights. Otherwise they'll become sterile/impotent and Japan itself will become an also ran. I bet the Asian bride websites are going bonkers. Probably they're posting. GET ME OUT OF HERE! I'll do anything!!!!
This report fails to address commonsense issues. I know most people need to have it spelled out for them. Ostrich Trading 101 is Cramer. Put your head in the sand and hope the impossible gets better.
I'm pretty damn sick of the GOVTs just printing any amount of money they need. Hey how is it possible PORTUGAL AND SPAIN AND GREECE etc are in trouble? Can't they just print more money and subsidize the TBTF in their respective companies. Why would any GOVT FAIL? Because if Portugal fails the USA and JAPAN and an number of others should fail.
Or is it simply, these countries that are "FAILING" don't have the ability to Launch a BigArse Nuke?
Excellent points all Sparky, well said.
ORI
I could go for a nice 1999-2002 OPUS bottle right now. Bought a few but they are stored on their sides at 73F. in low light. Corks watered when my humidor gets changed.
That was beautifully stated ZH.
From a Global Markets Perspective, the Broader Macro Context is Mostly Constructive
This is the key insight, it seems to me. What people fail to understand immediately after a disaster is that a lot of bad is swept away with the good. Look at New Orleans after Katrina. Notwithstanding the tragedy, a few years later the effect in New Orleans is essentially that of a lot of the least productive parts of the city having been swept away, as if by a bulldozer, clearing the path for what has become a new city. Japan will of course survive this, but the real effect will be felt several years from now, when growth will surpass the level that they otherwise would have achieved. It's sort of like "creative destruction" on the largest scale imaginable.