luni, 14 martie 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Shocking Tsunami Footage, Cars and Houses Swept Away Like Corks; Nuclear Reactor Explosion Video; Heartbreaking Aftermath Images

Posted: 13 Mar 2011 11:14 PM PDT

I have seen many Tsunami videos over the past few days but the video that follows is the most heart-wrenching by far. Quality is superb.

I do not know the origin. A friend passed it to me in a different format and I uploaded it to YouTube.



URL if video does not play: http://www.youtube.com/watch?v=TBSiO8T5EcA



URL if video does not play: http://www.youtube.com/watch?v=T_N-wNFSGyQ&feature=player_embedded

Japan Earthquake Aftermath

The Boston Globe has a stunning series of 44 images on the Earthquake Aftermath. Here are a few of them.

A resident is rescued from debris in Natori, Miyagi, northern Japan March 12 after one of the country's strongest earthquakes ever recorded hit its eastern coast March 11. (Asahi Shimbun, Noboru Tomura/Associated Press)



Rescue workers search for victims from the rubble in Rikuzentakata, northern Japan, March 13 after the magnitude 8.9 earthquake and tsunami struck the area. (Toru Hana/Reuters)



People in a floating container are rescued from a building following an earthquake and tsunami in Miyagi Prefecture, northeastern Japan March 12. (Kyodo News/Reuters)



An official in protective gear talks to a woman who is from the evacuation area near the Fukushima Daini nuclear plant in Koriyama March 13. Japanese Chief Cabinet Secretary Yukio Edano confirmed on Saturday there has been an explosion and radiation leakage at Tokyo Electric Power Co's (TEPCO) Fukushima Daiichi nuclear power plant. (Kim Kyung-Hoon/Reuters)



A man who was trapped by a tsunami is rescued by a Japan Self-Defense Force soldier in Kesennuma City in Miyagi Prefecture in northeastern Japan March 12. Japan confronted devastation along its northeastern coast on Saturday, with fires raging and parts of some cities under water after a massive earthquake and tsunami. (Kyodo/Reuters)



Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Japanese Futures off 2.5%; Yen Spikes to 1.2444, Mostly Retraced; Gold Firm, Crude Lower, S&P 500 Futures off Modestly; Explaining the Yen's Rise

Posted: 13 Mar 2011 04:55 PM PDT

Japanese futures are down about 2.5% this evening while S&P 500 futures are off a modest .6%. The Yen surged at the Forex open but has now retraced most of the move.

Crude is down about $1.50 and gold is up around $7. Of these moves the Yen is the most interesting.

Yen Daily Chart



click on chart for sharper image

Yen 15 Minute Chart



click on chart for sharper image

Explaining the Yen's Rise

I received several emails from people wondering why the Yen might rise given the Japanese government pledge to create "massive liquidity" as well as increase the deficit with "stimulus" money to repair the damage.

The answer in general terms is events of this type increase the demand for money. In this case, businesses and individuals affected by the earthquake need Yen, not whatever carry trade they may have been in.

There will be a repatriation of Yen for sure, although the magnitude is unknown.

Fundamentally, there is little reason to like the Yen, although significant short-term forces are in play. If the Yen does not rally in the face of increased demand, it could be a very telling signal.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Earthquake Moves Japan Eight Feet, Shifting Earth's Axis; Entire Villages Vanish Under Wall of Water; Nuclear Crisis Expands to 2nd Reactor

Posted: 13 Mar 2011 12:35 PM PDT

Scientists upgraded the devastating earthquake that struck Japan from 8.8 or 8.9 to 9.0 on the Richter Scale. That may not sound like much but the scale is logarithmic effectively doubling the estimated size of the quake.

Regardless of what the number is, the quake was devastating enough to move the main island of Japan 8 feet while shifting the earth on its axis. Entire villages in Northern Japan are missing, swept away by the resultant tsunamis.

Meanwhile Japanese authorities struggling with additional meltdowns have flooded a second reactor with seawater hoping to cool the plant. This is a desperate action that will probably ruin both facilities.

Power outages and lack of fresh water add to the misery.

Villages, Trains Vanish Under Wall of Water

The New York Times reports Japan Pushes to Rescue Survivors as Quake Toll Rises
While nuclear experts were grappling with possible meltdowns at two reactors after the devastating earthquake and ensuing tsunami in northern Japan, the country was mobilizing a nationwide rescue effort to pluck survivors from collapsed buildings and rush food and water to hundreds of thousands of people without water, electricity, heat or telephone service.

Entire villages in parts of Japan's northern Pacific coast have vanished under a wall of water, and many communities are cut off, leaving the country trying to absorb the scale of the destruction even as fears grew over the unfolding nuclear emergency.

In the port town of Minamisanriku, nearly 10,000 people were unaccounted for, according to the public broadcaster NHK. Much of the northeast was impassable, and by late Saturday rescuers had not arrived in the worst-hit areas.

JR, the railway company, reported that three passenger trains had not been accounted for as of Saturday night, amid fears that they were swept away by the tsunami. There were reports of as many as 3,400 buildings destroyed and 200 fires raging. Analysts estimated that total insured losses from the quake could hit $15 billion, Reuters reported.

Even as estimates of the death toll from Friday's quake rose, Japan's prime minister, Naoto Kan, said 100,000 troops would be mobilized for the increasingly desperate rescue recovery effort. Meanwhile, several ships from the United States Navy joined the rescue effort. The McCampbell and the Curtis Wilbur, both destroyers, prepared to move into position off Miyagi Prefecture.

One-third of Kesennuma, a city of 74,000, was reported to be submerged, the BBC said, and photographs showed fires continued to rage there. Iwate, a coastal city of 23,000 people, was reported to be almost completely destroyed, the BBC said.
Crisis Expands to Second Nuclear Plant

MarketWatch reports Japanese nuclear-power crisis expands to second plant
Citing Japan's Fire and Disaster Management Agency, Kyodo News reported the cooling system failed at the Tokai No. 2 Power station. No additional information was available. Tokai, about 75 miles from Tokyo and the site of nuclear-research facilities as well as the power plant, was the site of a 1999 radiation leak, known as the Tokaimura accident, that killed two technicians.

Word of the problem at Tokai came as Japanese nuclear authorities continued working Sunday to avert nuclear meltdown at an earthquake-damaged power plant, Prime Minister Naoto Kan warned Japan of large-scale power blackouts and said the disaster was the country's biggest crisis since World War II. That came as Japanese scientists increased their estimate of the largest earthquake in the nation's history to magnitude 9.0 from 8.8, more than doubling the size and the destructive energy release in the Friday afternoon, local time, quake off the coast of Honshu.

[Officials] began flooding the second reactor with seawater, a drastic move that scientists have said might render the units unusable. But the water gauge in the No. 3 has stopped functioning, making it impossible to tell whether the procedure is succeeding, The Wall Street Journal reported.
Earthquake Moves Main Island Eight Feet and Shifts Earth on its Axis

CNN reports Earthquake Moves Japan Eight Feet, Shifting Earth's Axis
The powerful earthquake that unleashed a devastating tsunami Friday appears to have moved the main island of Japan by 8 feet (2.4 meters) and shifted the Earth on its axis.

"At this point, we know that one GPS station moved (8 feet), and we have seen a map from GSI (Geospatial Information Authority) in Japan showing the pattern of shift over a large area is consistent with about that much shift of the land mass," said Kenneth Hudnut, a geophysicist with the U.S. Geological Survey (USGS).

Reports from the National Institute of Geophysics and Volcanology in Italy estimated the 8.9-magnitude quake shifted the planet on its axis by nearly 4 inches (10 centimeters).

The Japanese quake comes just weeks after a 6.3-magnitude earthquake struck Christchurch on February 22, toppling historic buildings and killing more than 150 people. The timeframe of the two quakes have raised questions whether the two incidents are related, but experts say the distance between the two incidents makes that unlikely.

"I would think the connection is very slim," said Prof. Stephan Grilli, ocean engineering professor at the University of Rhode Island.
Bank of Japan Readies "Massive Liquidity"

Bloomberg reports Japan Readies 'Massive' Liquidity as BOJ Gauges Risk to Post-Quake Economy
Governor Masaaki Shirakawa told reporters late yesterday he's ready to unleash "massive" liquidity starting this morning in Tokyo, as the BOJ seeks to assure financial stability.

Shirakawa and his board could opt to accelerate asset purchases, including government bonds and exchange-traded funds, within the existing credit programs, particularly if the yen climbs and stocks tumble, said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. in Tokyo, who used to work at the central bank.

The economic hit from the March 11 quake will depend on how long it shuts down factories and the distribution of goods and services, with the potential meltdown at a nuclear power facility clouding the outlook. For now, the central bank is likely to ensure lenders have enough cash to settle transactions, and aim any additional steps at providing credit in the areas of northeastern Japan devastated by the temblor, analysts said.

Japan's currency rose 1.4 percent to 81.84 per dollar March 11 amid prospects for Japanese investors to repatriate assets, bringing its gain in the past year to 10 percent. The government may order the BOJ to sell yen if it soars, Mansoor Mohi-uddin, head of global currency strategy at UBS AG in Singapore, wrote in a note.
Japan is already struggling with huge fiscal deficits and a debt-to-GDP ratio of 200%, highest in the G-20 group of nations. In response, government officials had been planning a series of tax hikes. You can now safely toss those hikes straight into the ashcan.

There is never a good time for a natural disaster, but this one could hardly have come at a worse time. Best wishes to all those affected by this crisis.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Scramble to Avert Meltdowns; Death Toll Estimate Tops 10,000; Industries Shut Down; Japan Goes Deeper in Debt; Keynesian Stimulus Nonsense

Posted: 13 Mar 2011 03:42 AM PDT

Ever since the earthquake and tsunami hit Japan, news has been flowing from the country, nearly all of it bad.

Partial Meltdowns Likely Occurred

The New York Times reports Japanese Scramble to Avert Meltdowns as Nuclear Crisis Deepens After Quake
Japanese officials struggled on Sunday to contain a widening nuclear crisis in the aftermath of a devastating earthquake and tsunami, saying they presumed that partial meltdowns had occurred at two crippled reactors and that they were facing serious cooling problems at three more.

The emergency appeared to be the worst involving a nuclear plant since the Chernobyl disaster 25 years ago. The developments at two separate nuclear plants prompted the evacuation of more than 200,000 people. Japanese officials said they had also ordered up the largest mobilization of their Self-Defense Forces since World War II to assist in the relief effort.

On Saturday, Japanese officials took the extraordinary step of flooding the crippled No. 1 reactor at Fukushima Daiichi Nuclear Power Station, 170 miles north of Tokyo, with seawater in a last-ditch effort to avoid a nuclear meltdown.

Then on Sunday, cooling failed at a second reactor — No. 3 — and core melting was presumed at both, said the top government spokesman, Chief Cabinet Secretary Yukio Edano. Cooling had failed at three reactors at a nuclear complex nearby, Fukushima Daini, although he said conditions there were considered less dire for now.

A meltdown occurs when there is insufficient cooling of the reactor core, and it is the most dangerous kind of a nuclear power accident because of the risk of radiation releases. The radiation levels reported so far by the Japanese authorities are far above normal but still too small to pose a hazard to human health if the exposure continued for a brief period. The fear was that more core damage would bring bigger releases.
Death Toll Likely Exceeds 10,000

Yahoo!Finance reports Japan quake-tsunami death toll likely over 10,000
The death toll in Japan's earthquake and tsunami will likely exceed 10,000 in one state alone, an official said Sunday, as millions of survivors were left without drinking water, electricity and proper food along the pulverized northeastern coast.

Although the government doubled the number of soldiers deployed in the aid effort to 100,000, it seemed overwhelmed by what's turning out to be a triple disaster. Friday's quake and tsunami damaged two nuclear reactors at a power plant on the coast, and at least one of them appeared to be going through a partial meltdown, raising fears of a radiation leak.

The police chief of Miyagi prefecture, or state, told a gathering of disaster relief officials that his estimate for deaths was more than 10,000, police spokesman Go Sugawara told The Associated Press. Miyagi has a population of 2.3 million and is one of the three prefectures hardest hit in Friday's disaster.

Teams searched for the missing along hundreds of miles (kilometers) of Japanese coastline, and hundreds of thousands of hungry survivors huddled in darkened emergency centers that were cut off from rescuers and aid. At least 1.4 million households had gone without water since the quake struck and some 2.5 million households were without electricity.

Japanese Trade Minister Banri Kaeda said the region was likely to face further blackouts and that power would be rationed to ensure supplies go to essential needs.

Large areas of the countryside remained surrounded by water and unreachable. Fuel stations were closed and people were running out of gasoline for their vehicles.
Auto Industry and Sony Shuts Down

The Telegraph reports Japan shuts down as economic fears grow
The three largest motor manufacturers – Toyota, Honda and Nissan – said they would stop production at almost all of their domestic assembly plants. The safety of the workforce and deaths were cited as reasons behind the decision. The electronics giant Sony also said it would be shutting down production.



Economists warned that the closures staged by the motor and electronics companies could be the tip of the iceberg, with other parts of industry likely to feel knock-on effects in the coming days.

"Temporary closures of factories and oil refineries and the shutting down of power stations are likely to affect output throughout the country," said Wolfgang Leim of Commerzbank. "Economic output may therefore shrink again slightly in the first quarter."
Japan Set to Go Deeper in Debt

Japan's national debt is 200% of GDP. Of the G20 nations, that is the highest percentage in the world in terms of Debt-to-GDP. Japan cannot afford more debt, but more debt is coming regardless.

Bloomberg reports Japan Plans Spending Package as Quake Slams World's Most Indebted Economy
Japan aims to compile a package to fund the rebuilding effort after its strongest earthquake on record, a step that may worsen the challenge of reining in the world's biggest public debt.

Policy makers will need to compile a spending package "over the medium to long-term" to cope with the aftermath of the 8.9-magnitude earthquake and the tsunami it triggered, Chief Cabinet Secretary Yukio Edano told NHK Television.

"A supplementary budget is like the last thing that people watching the JGB market want to hear," said Ogawa, adjunct professor at Columbia University's School of International and Public Affairs in New York, and a former Japanese banking analyst who lived in the nation for 15 years. The prospect of rebuilding "signals another leg down in Japan's fiscal health. So I'm concerned that in the short to medium run, there's going to have to be more borrowing," she said.

"We will probably need a supplementary budget to work on this," Sadakazu Tanigaki, who heads the Liberal Democratic Party, told reporters March 11 after Kan convened a meeting of party leaders. "We will cooperate with all our might."

Japan's borrowing burden is a legacy of economic stagnation following the bursting of its stock and property bubble in 1990. Financial-industry bailouts and repeated attempts to revive growth through fiscal stimulus contributed. The debt is set to reach 210 percent of GDP in 2012, the highest among countries tracked by the Organization for Economic Cooperation and Development, compared with an estimated 101 percent for the U.S.

One potential positive from the earthquake is the chance to revive a less-populated area of the nation. Provincial regions outside of Tokyo have borne the brunt of the decline in Japan's population since 2006. The prefectures of Akita and Aomori, within Tohoku, have had the biggest decline in residents in the five years through 2010. Miyagi, where Sendai is located, accounts for 1.7 percent of the nation's people, according to economist Richard Jerram at Macquarie Securities Ltd.

"This is a Keynesian stimulus program that nobody can argue with: just rebuilding the city of Sendai," said Marcus Noland, deputy director of the Peterson Institute for International Economics in Washington, co-author of the 2001 book "No More Bashing: Building a New Japan-United States Economic Relationship." "Rebuilding Sendai could actually be an opportunity to try to create a growth pole in northern Japan."
Keynesian Nonsense

I had been wondering how long it would take before some Keynesian clown would make a case that there is some economic benefit to be derived from the earthquake.

The idea is complete nonsense of course. There is nothing economically stimulating about tsunamis or earthquakes, or the destruction of any useful property.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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