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Japan Update: It’s Much Worse than it Looks
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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This article is dated 11 March. The same day of the earthquake, and before anyone had an idea that there was going to be radiation hazards. Coincidence?
Nothing happens by chance. Do you know there was a US/Korean joint military exercise that just conveniently ended on March 10? Do you happen to know there was US military exercise took place right near Haiti before the earthquake there and a relief plan was ready in Miami one day before the earthquake took place? Is that a coincidence someone could have had foreknowledge of the earthquake in Goldman's Tokyo office? Because Goldman had already evacuated before the Earthquake started. This world that we live in is played out according to a fucking script. Be afraid.
http://forum.prisonplanet.com/index.php?topic=203493.msg1214568#msg1214568
Would it be naive of me to believe that an earthquake and tsunami can NOT be centrally planned? So, how would that work exactly? I mean the physics of it. Assuming they could do it, what political/social/economic reasons would cause Japan to be selected as the "victim"?
As an aside:
Might be interesting to follow this trial for a crystal ball view of the status of holding gold:
CoinWorld provides coverage of the trial of Bernard von NotHaus, creator of the Liberty Dollar.
I would not be in the city on that day. To much history surrounding these "drills" going live.
I concur. It seems that federal responder "drills" can be as dangerous as the real danger that they are "drilling" to prepare for.
I would be far away, someplace where you're happy to stay for at least a week or two, in case borders get shut again.
If the nuclear plant problem were serious every fireboat in Japan would be parked next to the power plants, generator barges would be beached nearby and the military would be all over.
You learned your disaster management skills from watching Godzilla and Die Hard, didn't you?
right, because the first thing the power plant bureaucrats are going to do is come out to the cameras and say "Hey, we F'd up and we're responsible".
They, and the government bureaucrats, will all act like cats in the litter box and bury as much of their shit as possible.
Does this mean Japan will be hiring????
I think the repurcussions in the only nation to have experienced a nuclear attack (by the United States of course) cannot be overstated as well. Obviously Three Mile Island never broke containment--some say miraculously of course but it was a conscious decision by a very involved and far from risk averse Governor of Pennsylvania at the time (who had a legion of more than mere detractors at the time as I recall.) Was there a discussion of "flooding the reactor core" at the time? You'd have to ask Richard Thornburgh himself. I have no doubt however. Clearly "flooding with sea water" cannot possibly be right "under any emergency procedure." Perhaps the pictures lie but even though I am obviously a layman "clearly the chemistry doesn't." Perhaps some "good will ambassadorships" in the form of Carter and Thornburgh would be good right now "with all this greed thing" overriding what is clearly our's and the world's most significant economic relationship in East Asia?
I usually don't agree with much from the MHFT, but in this instance I agree with all except that regarding the radiological impact. There will be, if not already have been, complete meltdowns at Units 1-3. Since its already been admitted that Unit 4 has had a spent fuel pool fire suggesting that the core was offloaded into it for the maintenance outage, it should be plain to see that with the destruction occurring at the other units those spent fuel pools are probably in worse condition.
Several News outlets are reporting radiation levels of 400 millisieverts an hour near the Nuclear facilities. That level of radiation, if true, is deadly within a 10 to 24 hour period!
Holy cow! That's 40 Rem per hour! Are you sure it is milli and not micro Sieverts? Still, 4 R/hr is bad, bad, bad.
I may be looking for a new line of work soon.
What will be the biggest drag on the Japanese economy is the people themselves. Asians typically do not possess homeowners insurance so that virtually EVERYONE who lost their home will either have to sustain the financial burden themself or get a bailout from the government or end up homeless forever. The long-term losses will be incalculable.
"The Tokyo Stock Exchange.. trading lasted exactly four minutes until, with the TOPIX Index down 7%, the circuit breakers kicked in."
We shall see if the Nikkeis circuit breakers stop panic or create panic when things get up and running!
"The initial damage estimate is $60-$120 billion ... ." Are you kidding me? Am I the only one who saw the videos of the tsunami?
Duplicate post. Why?
Shit! This has all the earmarks of a 200+ point rally in the Dow!! Party on Zimbabwe Ben!!
Yep, and the excuse for the MSM... US markets soar as CAT rumoured to supply machinery, with increased demand for other computers/materials/goods/services/(insert any other rubbish piece of nonsense here) from the US
oh and mustn't forget, ... oil price drop fuels rally in US on hopes for increased profitability from lower input costs
and, iPhones sales set to soar as many phones fell of tables and broke in the earthquakes
Given the circumstances, I am shocked that the MHFT did not regale us all with his story about the time when he worked at Los Alamos when he shutdown an out of control reactor using horse tail hair, an old arrow head and rattlesnake venom.
That would be much more in line with his usual advertorials. This one started out somewhat useful but quickly moved into a mixture of vague tripe and information that's contradicted by sources I consider more reliable.
Almost correct. It's actually much much worse.
http://www.counterpunch.org/lindorff03152011.html
Alvy is great and a straight shooter right out of the anti nuke think tank / waste container / pond known as IPS
How about this source then...
http://www.reuters.com/article/2011/03/15/japan-quake-fuel-boiling-idUSTFD00668620110315
Fukushima No. 4 reactor spent fuel pool may be boiling -Kyodo
Reuters ^ | 03/15/11
Fukushima No. 4 reactor spent fuel pool may be boiling -Kyodo
4:48am EDT
TOKYO, March 15 (Reuters) - A pool containing spent fuel at the quake-hit Fukushima Daiichi No.4 reactor may be boiling and the water level may be falling, Kyodo news agency quoted an official at the reactor's operator, Tokyo Electric Power Co , as saying on Tuesday
Looks like it is well on it's way to burning if it isn't already. Some reports say it is.
Are you as stupid as you sound in real life ANONYMOUS?
You bring absolutely nothing to this site but your own ignorance.
sensitive aren't we, it's just that avowed anti-nuke progressive envirowackjobs are not exactly the kind of source that inspire confidence - much better to have a Reuters link from 12 hours ago, better still why not cite Jane Fonda or Arianna
How about the IAEA then dipshit.
http://thechronicleherald.ca/Front/1233147.html
The International Atomic Energy Agency said Tuesday that Japanese officials told it that the reactor fire was in the storage pond — a pool where used nuclear fuel is kept cool — and that ``radioactivity is being released directly into the atmosphere.''
Stupid aren't we? :)
And tell me how long was the fire burning? Did you notice that when it was extinguished the readings started falling. You might want to check out this link, perhaps there were some strays lurking around the 'pond', I wonder if they got their whiskers singed:}
http://message.snopes.com/showthread.php?t=46285
We shall see... perhaps the fire is out as some reports suggest. I do suffer so from itchy trigger fingeritis...
I would be ecstatic with joy if they have this situation under control. My guess however is that this show ain't over till it's over.
Let's take a look see what's rising above #4 from time to time... should be nothing then.
Must be some live cams somewhere... looking... looking...
Nothing.
So just 3 reactors and 6 storage ponds to continually pi$$ water on for several months if the truth is being told. What could possibly go wrong.
Good article.
http://www.csmonitor.com/USA/2011/0315/Japan-nuclear-crisis-eclipses-Three-Mile-Island-nears-Chernobyl-league
The live news conf from NHK last nite was as ominous as anything I had heard with the explosion of #2 and the fire in #4 as the PM of Japan was warning of radiation and expanded evacuation perimeter - it is no wonder Nikkei fell off a cliff
http://www3.nhk.or.jp/daily/english/fixed/asx/15_29_512k.asx
Reuters 1:35 PM
http://www.reuters.com/article/2011/03/15/us-japan-nuclear-pools-idUSTRE72E6OL20110315
Reuters is exceptionally ambiguous today... did this article say rods still burning?
Just askin'... nice like! :)
my original comment related to Alvy's gloom and doom scenario, which fits or is made to fit nicely with the no nukes narra tive - I am sure that there is risk with those 'ponds' the question is the degree of risk. If the 'ponds' spontaneously ignited as 1,2 and three went into meltdowns rendering containment almost impossible then we'd be looking at a human and economic nightmare scenario ditto for the Yellowstone Caldera, San Andreas or New Madrid.
Off topic but related is the coming perigee syzygy to which I would give some credence and to that end if that precipitates a major aftershock and associated Tsunami than all bets are off.
I am glad your owner was able to slip some lithium into your Iams--nice kitty cat|>)
thanks for informed update
GDP down hard for two quarters - how do you see the subsequent two quarters of growth?
I remember pearl harbor and will never forget. I don't feel bad for them at all.
http://covert2.wordpress.com
You stupid motherfucker. Don't you know the real history? FDR provoked the Japs for the attack because they had already broken the Japanese code. Why FDR moved all CVs back to San Diego from the Pearl Harbor before the attack? Did Washington tell Pearl Harbor to expect some large groups of 200 bombers coming from the US mainland on 12/7? Coincidence? You stupid fuck!
The Japanese were not being very nice to the Chinese then. That sort of thing was driving American policy back then. And yes. The American's had the Japanese intercepts. They were reading about 10% to 15% of a given piece of "mail". Unfortunately there was nothing in the "mail" about Pearl Harbor.
And you know who the biggest criminal of all that day? MacArthur. Who with 12 hours notice let his planes be destroyed on the ground. In all the history I have read I have NEVER found an explanation for that one.
Yeah, that's right. The Chinese ruling elite didn't like the idea to be a part of Asia led by Japan because they enjoyed fucking the Chinese peasantry. It was a set up. To learn the truth, you need to a trip to the National Archives in DC.
You remember Pearl, huh? Lets see. That would put you at least into your mid 70s.
I'm not calling you a goddamned, sanctimonious, lyng cocksucker and a waste of human flesh or anything, and I do try to be respectful of the elderly.
But, clearly, you are not a very nice person.
Oh. Yeah!
just plain ole "not-too-bright" are you, covert.
Really? Read much about how our President essentially baited them into it, and could have prevented it? It's pretty common knowledge, but I'd be happy to provide a link if you need it.
I hardly think Pearl Harbor is a justification to hate a race of people years later. How about the internment camps. How about our invasion of Iraq under false pretenses. Or the carpet bombings in Vietnam, Agent Orange, etc. No saints here.
"I hardly think Pearl Harbor is a justification to hate a race of people years later"
I agree. And they really didn't mean for anyone to get hurt during the Bataan Death March. Oh, and those fliers who happened to survive crash-landing in Japan were often better off dead - they were carted off for "medical experiments" which mostly were seeing how long they would live with body parts removed or damaged.
Some folks remember those atrocities, and I can understand them not forgiving as easily as someone who had not lived through the era.
So, we should hate the children of anyone who does terrible things?
Glowing.