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Japan Update: It’s Much Worse than it Looks

madhedgefundtrader's picture




 

I just got off the phone with several frightened, somewhat dazed survivors of the Japanese earthquake who work in the financial markets, and I thought it important to immediately pass on what they said. Some were clearly terrified.

Japan’s economic outlook now appears far more dire than I anticipated only a day ago. It looks like GDP growth rate is going to instantly flip from +2% to -3%, a swing of -5%, similar to what we saw after the Kobe earthquake in 1995.  We have just had a “V” shaped economy dumped in our laps, and we have just embarked on a precipitous down leg. Two very weak quarters will be followed by two strong ones. The initial damage estimate is $60-$120 billion, and that will certainly rise.

Kobe had a larger immediate impact because of its key location as a choke point for the country’s rail and road transportation networks and ports. But the Sendai quake has affected a far larger area. Magnifying the impact is the partial melt down at the Fukushima Dai Ichi nuclear power plant, forcing the evacuation of everyone within a 12 mile radius.

Most major companies, including Toyota, Nissan, Honda, and Sony have shut down all domestic production. Management want to tally death tolls, damage to plant and equipment, and conduct emergency safety reviews. In any case, most employees are unable to get to work because of the complete shutdown of the rail system. Tokyo’s subway system is closed, stranding 25 million residents there.

Electric power shortages are a huge problem. The country’s eight Northern prefectures are now subject to three hour daily black outs and power rationing, including Tokyo. That has closed all manufacturing activity in the most economically vital part of the country.

Panic buying has emptied out every store in the major cities of all food and bottled water. Gas stations were cleaned out of all supplies and reserves, since much of Japan’s refining capacity has been closed. There are 20,000 expatriates waiting at Tokyo’s Narita airport as foreign companies evacuate staff to nearby financial centers in Hong Kong and Singapore. Airlines are diverting aircraft and laying on extra flights to accommodate the traffic.

The Tokyo Stock Exchange absolutely took it on the nose on Monday morning. Trading lasted exactly four minutes until, with the TOPIX Index down 7%, the circuit breakers kicked in. Most lead blue chips were down 10%, and 175 stocks never opened. Only construction stocks were up. Most of the selling was being done by foreign institutions and hedge funds, locals having vacated this market ages ago. This could be the beginning of a new bear market that will last for many months.

Prime Minister Naoko Kan has asked the Bank of Japan “to save the country.” The central bank responded promptly with ¥15 trillion, or $187 billion worth of credit market purchases. The yen spiked at the opening, as I expected, to ¥81.4, as carry trades were unwound en masse. Then the BOJ showed its heavy hand, slapping it back down to ¥82.2 where it has sat since. They appear to be taking on all comers at this price, and have the printing presses to fall back on. The situation remains fluid.

My global macro call proved spot on. Oil is down $2, plunging to a two week low below $100/barrel, blindsided by shrinking Japanese demand. Equities were sold worldwide. Uranium miners in Australia took a particular pounding, as the nuclear crisis casts a long shadow over this reviving energy source. Insurers were unloaded in London and Zurich. The S&P 500 opened down 10 points to 1,295 in the futures markets, close to Friday’s low.

It looks like we are seeing the first multiple partial nuclear melt downs in history. But a professor at nearby UC Berkeley tells me this is more of repeat of Three Mile Island, where half the fuel rods melted, than Chernobyl, where they all did. Small amounts of low radiation cesium and iodine have already been released, which should be measurable on American roof tops in about ten days. Neighboring countries are enforcing radiation testing of all food imports from Japan.

The death toll is certain to ratchet up considerably. Seaside villages that have been wiped off the face of the earth don’t return phone calls. Japan’s maritime self-defense forces are scouring the seas off of Sendai, rescuing a lucky few clinging to floating debris.

Finally, I wish to thank the many who sent me emails of concern, aware of my long family ties to Japan. Everyone is safe as they were fortunately out of the country when the disaster struck, or did not live in the worst affected areas.

Further updates to follow.

To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.

 

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Tue, 03/15/2011 - 23:12 | 1058954 Madhouse
Madhouse's picture

Most of the Jap nukes are on the east coast....radiation ready to move across to our West Coast.....Hawaii is fucked..

Tue, 03/15/2011 - 23:10 | 1058944 Madhouse
Madhouse's picture

CNN replaying former analysis as live....5 minutes after MIT prof issued dire prognosis..."this is now a completely different story"...

Tue, 03/15/2011 - 23:09 | 1058938 Rhodin
Rhodin's picture

I suppose it could get very much worse if Mt Fuji is awakened by the recent 6.2 EQ in the neighborhood.

 

http://www.volcanolive.com/news.html

Tue, 03/15/2011 - 22:44 | 1058775 exonomic halfbreed
exonomic halfbreed's picture

I used to run an evaporation unit on a sub and would have to shock scale from the steam basket occasionally.  The scale comes from the biologics and minerals.  So using seawater to cool the units will result in a buildup  of scale which will act as a thermal blanket in short order.  Couldn't they have flown in fresh water using large helicopters to fill some area, even a basement?

Tue, 03/15/2011 - 22:39 | 1058748 Madhouse
Madhouse's picture

This is it....50 employees leave....spell Meltdown. Spell Japan sells its Treasuries. Spell we are all fucked.

Meanwhile, back at the ranch, Obama touts nuclear industry. Why don't you shut the fuck up. Honestly, you would never in a million fucking years live upwind to a nuke. Why ? Because ultimately people get lazy, complacent and then rules become lax and then the power company from Georgia takes it over and they certainly don't give a shit. Pretty soon you have no plan to shut down the nuke because you can't - there is no way to shut it down. This is the exact situation with nukes in CT and in MA.  Also, while I am at it, to all the fucking frackers out there: fuck you, you fucking lying pieces of shit. You would never in a million years have one of your kids drink the supposedly safe drinking water - yea, the same water exempted from the Clean Water Act by who else but the most evil fuck on the planet: Dick fuckin Cheney. So, Obama, STFU... but I digress... fucking tail risk is never ending.... Japs are gonna dump those Bernanke bummer bonds....this is it

 

Tue, 03/15/2011 - 21:46 | 1058477 chump666
chump666's picture

Japan will go into a full fledged fiscal crisis.

 

...I mean how long can you run a 200% deficit, intervene daily in the markets. Allow the   building of crappy nuclear stations by companies that are pathological liars - that build the f****** things on Japans Tsunami shorelines!!!

 

Tue, 03/15/2011 - 21:30 | 1058396 keating
keating's picture

Interesting question. In WWI, Japan was our ally and well known for humane treatment of prisoners. By WWII, the militarists had changed the entire psyche of the nation, and they were the most cruel and evil captors. Since the war, they have been the most peaceful and dependable allies. So, holding a grudge is a mistake.

2. They have plenty of money, including the trillion they loaned us. They do not need money aid. Poor countries do.

3. Three GE engineers quit because of the bad design of these reactors.

Tue, 03/15/2011 - 21:10 | 1058269 flrzero
flrzero's picture

Flights out of Narita have light loads so I seriously doubt that 20,000 people are waiting there. Check UA for example. I think the bigger problem is getting to Narita. It is not clear if they are running the N'Ex. I was looking at the Japanese JR site and there is simply no info about whether it is running.

I am going to head to Thailand in the next couple of days but will fly out of Haneda. My neighbor who is German disappeared; I haven't seen his car for like 2-3 days so I am guessing that he drove somewhere within Japan. I have never even looked into airport parking here, so no idea if it is even feasible.

Tue, 03/15/2011 - 21:40 | 1058444 Sysiphus
Sysiphus's picture

Go whore yourself silly for awhile and return if and when it all blows over.

Tue, 03/15/2011 - 21:24 | 1058360 ZerOhead
ZerOhead's picture

Very good idea. Do not rush to get back until the situation stabilizes... anyone who is leaving places less strain on available resources for those who remain.

Best of luck to all.

Tue, 03/15/2011 - 21:36 | 1058433 Zer0head
Zer0head's picture

Father, is that you Father?

Tue, 03/15/2011 - 21:03 | 1058233 reader2010
reader2010's picture

All these could be just smoke and mirrors. Just read on another forum, which I simply don't want to believe.

"The Japanese nuclear reactors are going to be allowed to meltdown in order to cover up the radiation released from the 33 megaton nuclear detonation that, along with harmonic electrostatic manipulation of the ionosphere directly above the earthquake zone, triggered the earthquake 231 miles off the coast of Tokyo on March 11, a date chosen in the final chain of purification occult rituals starting with 9/11/2001.


The nuclear trigger was placed several thousand feet beneath the sea floor at the tectonic fault line, but radiation will begin to leak from vacancies caused by this explosion within the next week. Collapsing vacancies will continue to trigger significant aftershocks over this time.

A similar nuclear device has been placed at the site of the Macondo blowout and is planned for detonation along with several other bombs along the New Madrid fault area before the end of March.

The expected outcome is a magnitude 9.0 earthquake with an epicenter in northeast Arkansas about 45 miles west of Memphis with casualties numbering in the hundreds of thousands. New Orleans will be heavily damaged by the ensuing tsunami. Memphis will bear the most severe devastation, but cities will suffer heavy damage well north of St. Louis, where another subterranean nuke has been positioned by agents of the Ascended Masters.

Another seismic event of equal magnitude is planned for California before the end of the year. However, the order of these events is fluid although the deadline for both events will not be allowed to slip beyond Q4 2011."

http://forum.prisonplanet.com/index.php?topic=203573.msg1215210;topicseen#msg1215210

Tue, 03/15/2011 - 23:37 | 1059113 HungrySeagull
HungrySeagull's picture

Just one word on that theory, fantasy beyond reason.

Ok that was three. Entering into the Alice of wonderland type stuff.

Tue, 03/15/2011 - 22:24 | 1058665 swmnguy
swmnguy's picture

You didn't mention that the post began, "I am a Rosicrucian who is rebelling against current plans. This is what I've confirmed through astral projection."

I don't know about anyone else, but I don't act on any information that hasn't been confirmed through astral projection.  By a Rosicrucian, no less.  'Cause I'm the cautious type.

 

Tue, 03/15/2011 - 22:13 | 1058602 MSimon
MSimon's picture

reader2010 on Tue, 03/15/2011 - 21:03

 

It is all true.The reason you haven't heard more is that they are covering it up. What they aren't telling you is worse than what they are. Use your imagination.

 

Then post it in a comment. Please.

Tue, 03/15/2011 - 21:42 | 1058452 Thunder Dome
Thunder Dome's picture

Thanks for the info. I plan to position my retirement fund accordingly.

Tue, 03/15/2011 - 21:19 | 1058326 ZerOhead
ZerOhead's picture

Feel free not to believe because it is 100% horseshit.

The current state of Fukushima (the irony... who is 'shima' anyway?) 1,2,3,4,5 & 6 is bad enough. I remember even the reindeer in Lapland (Finland) was inedible after Chernobyl... think of fallout on North American farmland.

Now worry.

 

Tue, 03/15/2011 - 22:41 | 1058765 swmnguy
swmnguy's picture

Shima's the guy who screwed this whole thing up.  Fuk him indeed.

Tue, 03/15/2011 - 21:01 | 1058225 flrzero
flrzero's picture

What rubbish. The Tokyo metro is closed? Maybe I was fantasizing taking the metro the past few days? It was closed during the evening of March 11 due to the quake. It is running at 80% capacity (the line that I take) due to power conservation. They train line reduction in the periphery is higher. They are prioritizing the central part of the Tokyo where the elite lives and letting the plebs in the outer areas suffer. The Tokyo area is very stratified based on how far out you live and how miserable your commute is.

And full capacity is a train like every 2 minutes......

Tue, 03/15/2011 - 19:00 | 1057702 gall batter
gall batter's picture

The Japanese are showing so much dignity--no looting and resolved to recover and rebuilt.  The bobble heads on CNN are asking why there is no looting. Even asking viewers to weigh in on this.  

Tue, 03/15/2011 - 18:33 | 1057596 Buck Johnson
Buck Johnson's picture

This is no way like 3 mile island in fact I can say that it will be worse than Chernobyl.  Over the course of 4 days, four reactors are in trouble and the other two 5 and 6 are a concern also.  You see even though 4 and 5 and 6 where not producing, they still need to be cooled down.  When the tsunami came onto shore it also knocked out the cooling ability of those reactors also.  But since they where submerged and not in use (meaning that even though they where giving off heat, it was cool enough to not boil away the water fast like an active reactor would) the heat was maintainable.  But since the heat has been going up and the water is boiling off it is showing that the ability to keep the remainder reactors and their cooling pond of spent fuel safe isn't working.

Also another fire just reignited on the 4th reactor, Japan is going down.

Tue, 03/15/2011 - 17:51 | 1057402 DNB-sore
DNB-sore's picture

At this moment I'm looking at a Dutch news program and they said that a company named PEMGO or someting like that is running these plants. They were also involved with a previous accident and falsified papers to cover up incompetence. I'm searching for the name and what they did wrong, can somebody fill this in?

Tue, 03/15/2011 - 17:38 | 1057333 HungrySeagull
HungrySeagull's picture

Well, I see piles of high quality scrap that can be turned into material for a new Japan and piles of kindling that can be converted to firewood to stay warm and cook and well defined tusnami zones to not rebuild in.

Trying to be positive.

With that said, I think here in America I watched a People strip online vendors to the point that they have to close down online servers for orders.

UPS even told one in particular that nothing is being shipped to Japan right now and dumped 8,500 orders right back on the front door (Or warehouse dock) in texas.

 

Maybe some of the Ocean going vessals that are stranded on dry land can be shored up and then loaded with people in a orderly fashion. After all they should still have fuel aboard for engines to make power, galleys to cook in and space in the hold to keep people out of the cold.

If Japan still have any large desiel engines for the railroads like we do over here in the USA, the Prime movers can be tied into a local neighborhood to power a certain amount of homes with DC or AC power instead of turning the wheels.

 

Decontamination would be easy. Just do what the Soviets do. Strip a jet engine off a 737, bolt it down on a flatbed truck, grab a tanker truck full of water (Any kind will do), blow the jet on the object to be decontaminated and blast it clean with water.

If a city or town is choked with trash debris and all that from the waves, just burn it all. A dab of fuel thrown onto a Match will get it started. Wait a few days and then bring a loader in to shove the ashes away.

Yes things are bad, but little by little the days will get better.

Tue, 03/15/2011 - 19:01 | 1057710 Matte_Black
Matte_Black's picture

I applaud your can-do spirit, but I'm thinking some of your solutions would exacerbate the situation where radioactive contamination is concerned.

Nice try though.

Tue, 03/15/2011 - 23:38 | 1059116 HungrySeagull
HungrySeagull's picture

Thank you, but ya I suppose the Radiation will complicate things.

It's my first anniversary here on Zero Hedge and wanted to say good things.

Tue, 03/15/2011 - 16:38 | 1057138 americanspirit
americanspirit's picture

Just read that PG&E is saying that the Diablo Canyon reactor is designed to withstand a magnitude 7.5 quake which is beyond the consensus limits of what could happen. Well, that's comforting to know, isn't it.

Tue, 03/15/2011 - 17:22 | 1057287 chumbawamba
chumbawamba's picture

And tsunamis?

I am Chumbawamba.

Tue, 03/15/2011 - 21:18 | 1058322 Iam_Silverman
Iam_Silverman's picture

"And tsunamis?"

The link below may ease your mind some.  That cliff is actually quite a bit taller than it appears in the picture:

http://www.slocounty.ca.gov/OES/NPPInfo.htm

 

Tue, 03/15/2011 - 23:40 | 1059118 HungrySeagull
HungrySeagull's picture

If they stayed with old fashioned air breathing desiels instead of the modern computer controlled engines, even if they got flooded out; the old engines could be worked out and lit off again once the water was removed and the fluids replaced.

 

I miss the music of a good desiel when it is running in it's sweet spot.

Tue, 03/15/2011 - 17:04 | 1057229 falak pema
falak pema's picture

Diablo means that its pandora's box...so it is destined to talk...let's hope its daffy duck quack... not sayonara like on the other side...

Tue, 03/15/2011 - 16:53 | 1057195 dark pools of soros
dark pools of soros's picture

yeah but what about all those terrorists out there with junk bombs???  be afraid, always

Tue, 03/15/2011 - 16:33 | 1057126 Miles Kendig
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Your best read yet MHFT.  Neither buy or sell side, just plain old dose of observable fact and acknowledged observation.  Best to you and yours.

Tue, 03/15/2011 - 16:31 | 1057114 Lets_Eat_Ben
Lets_Eat_Ben's picture

I would be willing to house/clothe/feed a few single japanese women. (Not trying to be an ass here).

Tue, 03/15/2011 - 16:51 | 1057189 dark pools of soros
dark pools of soros's picture

I already cornered the geisha market..  I'll sell a few to you at 20% premium

Tue, 03/15/2011 - 16:29 | 1057112 Precious
Precious's picture

I just got back from Japan.  There are not 20,000 expats at the airport.  In fact, it couldn't have been more normal.  

You're not just mad.  You're a fucking raving lunatic.

 

Tue, 03/15/2011 - 21:38 | 1058440 GuyJeans
GuyJeans's picture

So far my area hasnt had any power outage in Yokohama. The convenience store had meat, bakeries are baking bread, some restaraunts were open and serving. Trains have been crowded but have been running and Ive made the one hour commute to work and back Mon, Tues and Wed. People are worried of course and hoarding but it hasnt become out of hand yet.

Tue, 03/15/2011 - 17:21 | 1057283 still kicking
still kicking's picture

so you left today, landed today then immediately logged on to ZH to make that comment?  I'm not calling you a liar buuuut I don't think I believe you.

Tue, 03/15/2011 - 18:34 | 1057595 reader2010
reader2010's picture

Just go to any airline's website to book an outbound ticket from Tokyo. Reality says it all.

Tue, 03/15/2011 - 16:13 | 1057054 tokyogp
tokyogp's picture
As a resident of Tokyo for 6 years, until recently, let me share with ZH about how hard life is there now: no food, periods of no electricity, public transportation down in a city of 35 million who rarely own cars...and with a threat of some toxic cloud heading their way. The three great tragedies: earthquake, tsunami and nuclear meltdown are compounded by the shutdown of the economy. Tokyo has literally hundreds of thousands of restaurants and bars: many Tokyo residents drink with colleagues or eat out for the vast percentage of their meals. This is truly a huge percentage of the Tokyo/Japanese economy. However, with the lack of transportation, perhaps delivery, and fear of being caught outside, this portion of the economy has shriveled. Last year, with the slowdown of the economy, many ex-pats left and my Japanese teacher took two part time restaurant jobs. Now, today, she was laid off those two PT restaurant jobs and is wondering how to make ends meet. Her story is shared by the millions of PT workers.   The unfolding economic slowdown/shutdown in Japan will be really, really tough in a society whose safety nets are family. This is especially true for single women with no living relatives.   Here is a powerful image from CNN today: Japanese holding signs in English for the world wide audience, "Thank you for your prayers!"   I cannot imagine a better time for prayers.
Tue, 03/15/2011 - 18:31 | 1057590 reader2010
reader2010's picture

How do you mail order brides from Japan?

Tue, 03/15/2011 - 16:08 | 1057044 miker
miker's picture

The correct term is Spent Fuel Pool.  This is where the freshly discharged fuel is stored for some time until reprocessed or moved to air cooled casks.  All spent fuel generates heat.  The most recently discharged (unloaded) fuel assemblies are the hottest.  If they can't get water up to these pools, they will boil dry and the hot assemblies will heat to the point of fire and partial melting.  Since the pools are located in the metal reactor building (Units 1 and 3 had tops blown off), they really don't have much of a barrier to the atmosphere.  Normally an air filtration system would be available but with no power, that's out.  So the Spent Fuel Pools will likely be the worst case releases except that perhaps U2 will also be bad if the reactor containment has blown open from an inner hydrogen explosion.  The problem now is that the radiation levels may be so sever that no workers can stay in the area without risking death; therefore further cooling may be impossible.  This is what happened at Chernobyl; remember the helicopters ended up dumping sand on the reactor to cover it.  Those crews may also have died.

Tue, 03/15/2011 - 14:46 | 1056644 MGA_1
MGA_1's picture

Ah.. I think this nuclear disaster may end up being much worse than expected.  If nuclear material has been directly exposed and there is fallout, then there will be big troubles in affected areas.  Truly a disaster.

Tue, 03/15/2011 - 15:03 | 1056728 Mad Max
Mad Max's picture

Thank you for that useful lesson that a=a, b=b, etc.

There truly can be no doubt that if bad things happen, bad things will happen, and a disaster would be disastrous.  Yes, the fallout from fallout will affect the fallout areas with its fallout.

Tue, 03/15/2011 - 15:30 | 1056863 dark pools of soros
dark pools of soros's picture

not if Blythe can naked short the non realities

Tue, 03/15/2011 - 15:22 | 1056824 Financial_Guard...
Financial_Guardian_Angel's picture

Mad Max: Now known as the slayer of "Captain Obvious". (Spoken like Borat): "Very Nice!"

Ha!

Remember, Captain Obvious has alot of clones around here...

Tue, 03/15/2011 - 15:53 | 1056982 Mad Max
Mad Max's picture

Thanks.  In this instance I will only take credit for slaying Buck Private Obvious, however.

There have been some really stupid comments lately.  Is this a new tactic of the professional trolls working for TBTF, or is ZH really attracting rank morons?

Tue, 03/15/2011 - 14:38 | 1056622 reader2010
reader2010's picture

Mark my words. the official QE3 will start in the begining of April.

Here is your 411 event in NYC.

 

http://www.bloomberg.com/news/2011-03-11/new-york-police-plan-to-conduct-dirty-bomb-training-exercise-in-april.html

Tue, 03/15/2011 - 18:16 | 1057529 equity_momo
equity_momo's picture

QE2 doesnt end till June. 

Tue, 03/15/2011 - 18:25 | 1057557 reader2010
reader2010's picture

it's multithreading of QEs.

Tue, 03/15/2011 - 18:31 | 1057589 equity_momo
equity_momo's picture

You should never cross the streams Venkman.   

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