Japanese Intuitive Assessment Update

On 13 March, 2011 I published an Intuitive Assessment of Japanese Disaster.  An update to that assessment is necessary because the events taking place there are in movement.

WHAT I GOT RIGHT

• I initially sensed a growing sense of disorder.  I am happy to report that my feeling is that folks in Japan are coalescing in a more unified way.  The palpable sense of disarray, disorder and increasing chaos has now stabilized.  Plans are finally being put in place to recover from the disaster.  Initially I reported that the military and political structures in Japan were exceptions.  I feel that the military’s role is declining as everyday citizens of Japan make choices to move forward from this overwhelming disaster.
• I said that I felt that the disaster as of 13 March, 2011 had the potential to get worse before it got better even though the earthquake and subsequent tsunami had already happened.  I am certain that you would agree with me that the situation got much worse, especially in consideration of the nuclear power plant crisis.
• In the intuitive assessment I also said: “It feels as if to me that the second nuclear power plants that is in jeopardy of experiencing a meltdown will not suffer that fate.”  I was spot on in this assessment.  The only plant remaining in crisis is the Fukushima Daichi plant, while the Fukushima Daini plant has been contained.
• I also said that: “Unfortunately, the plant that has melted down is going to cause serious loss of human life through radiation poisoning.  I would expect this number to be in the low thousands.”  It is too early to tell what the ultimate loss of human life will be from the Daichi plant as radiation poisoning affects the human body insidiously.  I can say that I admire the courage of the workers who are trying so hard to stabilize the Daichi plant.  I sincerely hope that they are protected and are ultimately unharmed by their heroic efforts.
• In the assessment I stated that the Japanese disaster was unlikely to result in a double-dip recession for the global economy.  Because the Japanese nuclear crisis is still not contained it is too early to tell what the ultimate effect will be on the global economy.  However, many investment and economic pundits now agree with my initial and early assessment of the Japan disaster.
• I predicted that commodities prices would rise because of the disaster and that is exactly what has occurred.
• I stated that I expected financial markets would fall between 2-5% and recommended buying on any dips that took markets below 2%.  On Monday, 14 March, 2011 the Dow Jones Industrial Average opened at a level of 12,042.12 and fell to a low of 11,548.14 on 16 March, 2011.  That represents a decline of 4.1% in the DJIA.  So the intuitive assessment of the decline exceeding 2% was correct.  The assessment was also correct that the decline would be less than 5%.  Had you bought when the market had declined by 2%, a DJIA level of 11,801.3, you would have made about 1% as of 10:24am MDT on 18 March, 2011.  In other words, the market seems to have bottomed with regard to the Japan crisis when it hit 11,548.14 on 16 March, 2011 and is now in recovery mode.
• I named the nuclear crisis as a key element to focus on saying, “The outcome of Japanese efforts to contain the fallout from these two nuclear crises is more important right now than the recovery from the tsunami.”  I think that you would agree with me that turned out to be true and at an early stage of the crisis – about 48 hours after the initial earthquake and resultant tsunami; we are now fully one week past those events.
• I also encouraged readers to not become myopic and focus too much on Japan, instead suggesting that they also focus on what was happening in the Middle East.  Specifically I pointed out Iran as a deserving investor attention.  During the past week it is believed that Iran did in fact try and escalate the crisis be egging on the protesters in Bahrain.  So this portion of the assessment was also accurate.  However, the Saudis responded by sending in troops of the Gulf Cooperation Council to shutdown the protests.

WHAT I GOT WRONG

• As of the writing of this piece it looks as if the number of dead I predicted from the nuclear disaster will prove to be too high.  Other than that, my intuitive assessment, delivered just as news about the nuclear disaster was unfolding, was spot on.  Additionally, I think that you would agree with me that the Japanese government was not forthcoming with information about its various crises.  So how could you make choices based solely on the reported news?
• Folks, this is why, as an investor, I believe so strongly in intuition.

I will continue to monitor this very volatile, and still potentially dangerous, situation and report anything that I find.

Jason