It is still very early days in this Japanese earthquake tragedy but my feeling is that this event is going to be a game changer for many things, including investment markets. Firstly the process of recovery and rebuilding after the terrible devastation of the massive earthquake and its attendant tsunami will absorb a great deal of the resources and focus of one of the world’s great economies. But probably even more devastating will be the unfolding drama of the damaged nuclear power plants. Hopefully the short term risks and horror of radiation leaks will be small and contained, but the “I told you so” anti-nuclear brigades have already begun to muster and in the years ahead the generation of electricity by this method will become even more mired in doubt and fears.
The fact that nuclear fuel is really the only current realistic alternative and replacement for coal, oil and gas for generating significant and reliable electricity, will be denied in a flood of misinformation and non-science. Politicians will leap aboard that band-wagon in an orgy of vote catching. It is likely and sensible that existing nuclear power plants will have to be subjected to new tests and checks in the light of this Japanese experience. The commissioning of new ones will certainly become delayed and postponed. The consequence will be that many economies will probably soon experience power shortages and price rises. Earning a profit from making and selling certain goods and services will probably become very much harder as disposable income gets diverted to necessities. One exceptionally pessimistic analyst has suggested that even the UK is about to experience food riots!
It is sad to find myself offering such gloomy thoughts after a wonderful few days in the kingdom’s high mountains, but a wander through my favourite charts now that I am back in the land of computers shows that markets are also not very confident or happy and were already drifting downwards markedly even before this latest and exceptionally large natural disaster struck. The All Share is 6% off last month’s high.
Results from December year-end companies continue to fill the business section of the newspapers and there appears to be almost a weird sort of relationship between the amount of space taken up and the weakness of the situation they reveal. It is hard to find the bad news when it is buried in acres of fine print spread across two pages. FNB who have produced about the best results of the major banks managed to act hurt and surprised when their rather good numbers leaked before the scheduled time. The JSE played along and suspended trading in the counter to ensure that no investor would be disadvantaged. Oh really.
Sport and investing are equally devoid of logic. Prices rise when they should fall and teams lose when they should win. Italy beat France in the Six Nations rugby, and the team that lost to England who in turn lost to both Ireland and Bangladesh at the Cricket World Cup, beat India last night. Whew. It is very hard work supporting Proteas cricket. Please note the Lions’ victory over the Cheetahs in the Super 15 last night.
James Greener
13th March 2011
