In yesterday's e-mail I said I am
increasingly focusing on what might be some of the 'specifics' of the
economic consequences of the Japanese earthquake in both the near and
longer term, and that I would include my current thoughts in today's
e-mail. Here they are:
· nuclear power issues are obviously going
to be debated going forward, not only Japan but broadly across many
countries. This may have a long-term impact on uranium
prices on the downside, although I think the bigger issue is more likely
to be cost on the nuclear reactor build side;
· Japan will almost certainly face
escalated national debt levels, which already are about two times
Japanese GDP;
· Japanese banks may face escalated loan
defaults and savings withdrawals;
· Japan's oil and natural gas imports are
likely to increase for the foreseeable future;
· Japan will face manufacturing plant
shut-downs and slow-downs during the rebuild period and until rolling
electrical blackouts are a thing of the past;
· the Japanese populace will face a reduced
standard of living until the electrical blackouts cease, and until food
and water supply 'normalcy' are restored or largely restored;
· some production may move permanently from
Japan, to the benefit of other developed and developing countries;
· if what has happened and is happening in
Japan results in a slowdown of the world economy, base metal prices may
be negatively affected. If it doesn't, base metal prices
might escalate from here;
· Japan may be forced into an increased
dependency on food imports, which could push food prices higher than
they otherwise would be, with in turn could have other global 'social
unrest' implications;
· the U.S. Fed may be forced to continue to
buy U.S. Treasuries after June of this year, the time frame it
currently is committed to. U.S. National debt issues are
likely to exacerbate further;
· heavy equipment companies such as
Caterpillar are likely to see positive developments from the Japanese
situation; and,
· overall, I think risk to what I see as
the fragile macro-economic and individual country (particularly the U.S.
and EuroZone countries) has escalated on the negative side.