Nuclear Power Steps Back. QE Steps Forward.
A second reactor at the Fukushima Daiichi nuclear plant in Japan may have ruptured. Plans to douse the reactors with water via helicopter had to be abandoned. Radiation levels are apparently too high.
“The nuclear renaissance is dead,” concludes Chris Mayer in his essay “Japan’s ‘Three Mile Island’”, after several days of deliberation that began early on Saturday at JFK airport in New York, where we heard news of the first explosions.
“In investing, you have to change your mind when the facts change. In the last two days, the picture for the nuclear industry clouded over, big time.
“Japan alone makes up 11% of the world’s demand for uranium. I suspect it will use less in the future. I suspect many of the plants in Europe, both planned and existing, are in jeopardy.
“The whole process of developing nuclear energy will slow. The industry will feel the chill from Japan for years. That’s my guess.
“The facts won’t matter. Look at what happened in the Gulf after BP’s oil spill. All drilling ceased. It didn’t matter what your safety record was. And even now, drilling permits are incredibly difficult to come by.
“The stakes are far greater with nuclear.”
This morning, the Chinese suspended approval of all new nuclear projects – a big step for one of the world’s most aggressive nuclear programs.
But that particular meltdown is not our beat, is it? The economic and financial one is…
The nimble investor will have to pivot to new opportunities that result. “The problem for the nuclear industry,” says Chris, “is an opportunity for natural gas, for instance.
“Natural gas-powered utilities will look easy and cheap compared to nuclear. Japan will import more liquefied natural gas (or LNG) to meet the shortfalls created by its nuclear industry.”
In light of the earthquake and tsunami and nuclear crisis “institutional investors will revise their expectations for global GDP growth in 2011,” advises our forensic accountantDan Amoss of Strategic Short Report. “When they do that, many will lighten up on their allocation to stocks.”
Thus, the Dow and the S&P are adding to yesterday’s losses. The NASDAQ got crushed nearly 4% in the first 45 minutes of trading this morning.
“The stock trading community seems as spooked as it was in the wake of last May’s flash crash,” Dan continues. For evidence, he points to Vancouver veteran Dennis Gartman’s daily missive yesterday.
“Panic is the order of the day,” says Gartman, “and there are times when panic is actually the better part of investment valor. It is better to panic and remain liquid than to retain one’s sense of ‘cool’ and step into the fray…
“This is going to become vicious, and it is going to get much, much worse before it gets even modestly better.”
Falling stock prices add up to one sure thing – more easy money from the Federal Reserve.
“I think Mr. Bernanke doesn’t know much about the global economy,” our friend Marc Faber tells CNBC, “but he probably watches the S&P every day.
“We may drop 10-15%,” Faber continues. “Then QE3 will come, [then] QE4, QE5, QE6, QE7 – whatever you want. The money printer will continue to print, that I’m sure.” Later, he added, “Actually, I made a mistake. I meant to say QE18.”
That said, his outlook for Japanese stocks is much in line with our own Trade of the Decade: “This huge selloff is an investment opportunity in Japanese equities,” although he cautions, “if a meltdown occurs, then all bets are off.”