In the article today which I read while watching Sorcerer’s Stone again, I read Gillian Tett’s Insight article in the March 16, 2011 Financial Times, titled Japan’s Supply Chain Risk Reverberates Across the Globe.
She thought one reason for the collapse of the world’s financial system is its great complexity where one really did not understand what would happen because many investors did not realize the extent of these essentially secret world-wide distribution of all these fancy financial derivatives. The companies like Moody were essentially giving these instruments AAA ratings even though they did not really understand them. They unfortunately relied on banks such as J.P. Morgan and Goldman Sachs to “explain” these "safe" instruments.
I thought the risk was essentially in the USA, but how wrong I was so I did not short the S&P 500 and get out of stocks!
Tett uses the same argument about the complexity of our supply chain where the i-Phone, for example, depends on nine companies in different countries with Japan being important too. So if you want to buy the i-Phone or i-Pad, order it now. You might get it. Apple decided not to open sales in Japan because of the potential shortage.
In another analysis in the FT, Lindsay Whipp and Robert Cookson tells us that most of the Japan market selling was done mostly by foreign fund managers. What happens to the world economy depends on how successful Japan is in lowering the risk of further radioactive leaks.
James MacIntosh in The Short View explains the risk is minuscule that the Fukushima Daichi nuclear plant will turn into a new Chernobyl. I agree based on the restoration of electricity to the plant. A Canadian Japanese theoretical physicist who is popular on radio and television unfortunately ignorantly called for a possibility of another Chernobyl and on Maddow show a Carnegie Peace fellow, an organization I do not trust, made some outrageous comments about the nuclear plants dangers to worsen the current scare climate.
Contaminated Meat from China: Although we tend to blame the Chinese for adulterated products such as Heparin, dog food, and now chilled processed meats on China, at least a large part of the blame should be placed on American companies such as Walmart and Big Pharma who demand such low prices that the Chinese manufacturers have to avoid paying their workers to meet the American price threat of going to Vietnam. As in the Stock Market crash all American investors are to blame. We insist on low prices no matter the consequences to our supplier, and force companies to increase profits each quarter or we will sell their stock!
Investor Caution? We may expect more bad news says Hal Weitzman and Daniel Pimlott of FT, March 17, 2011. Many owners may opt for bankruptcy as the economy heats up because of a freeing up of credit. As I said before the financial market is too hard for me to really understand. I do understand that the risks are not over. I increased my holdings in global fixed income shares, put my toes into real estate REIT now because everyone is negative which allows me to wait getting six percent interest rates.
Sure folks are buying Treasury bonds again, but I would not make them long term holdings. Remember the Federal Reserve was formed for the Rich People by calling it not a National Bank which President Jackson, the people’s President, with the exception of Native Americans and Mexicans. In the panic of 1907, J.P. Morgan, one of the Robber Barons, himself kept the US financial system from collapsing. In 1913, the Federal Reserve was reformed to keep the rich folks rich by checking inflation to keep their bonds from falling. Bernanke said today that he will continue to allow zero interest loans for the rich a while longer and not end it in June as he indicated not too long ago so apparently he does not think inflation is just over the hill. I agree.
Jim Kawakami, March 17, 2011, http://jimboguy.blogspot.com