Intuitive Assessment of Japanese Disaster

Unfortunately the news of the world has provided another opportunity to use intuition to assess a very complex situation: the disaster in Japan.  As a full understanding of the facts is sketchy at this moment, and the facts keep pouring in albeit in a scattered, incoherent fashion, it is a natural use for intuitive assessment to get a sense of the big picture and what the key elements of the crisis are to focus on.

Sense of the Big Picture

As of 11:43am MDT on 13 March, 2011, there is a very strong sense of accelerating disorder in Japan.  What I mean by this is that people are not uniting around singular points of consciousness.  For example, they are not uniting around their government; they are not uniting around a unifying flow even including family right now.

The strong sense that I get is that people have been so shocked by what has happened that they have shifted their consciousness away from collective consciousness to individual consciousness.  Generally the individual consciousness can be described as in deep survival mode.  Most people’s vision of the crisis extends to a momentary sort of consciousness that doesn’t allow for a medium, to long-term view of events.

Exceptions to this include the military and political structures of Japan.  The military at this moment feels more ordered, more powerful and hence more capable of helping to restore order.  Japan has experienced a fractious political structure for over 20 years and this event has the potential of unifying the country around a new orbit.  That crisis orbit will help to unify the country beyond the limits of a political orbit.  Just as citizens of the United States became Americans again on September 11, 2001, instead of Democrats or Republicans.

This means that the crisis has the possibility of getting worse before it gets better.  Because the underlying human forces are of chaos it is currently almost impossible to set a local, regional, and national agenda to begin the process of recovery.  Hope is largely absent in the citizenry of Japan in the midst of such discord, instead the palpable sense is “when is the next shoe going to drop?”

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.  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.

Electricity is going to take some time to restore in pockets throughout Japan because of the taking offline of important nuclear power generation.  The primary short term effect of this will be a blow to Japanese gross domestic product (GDP) as whole swathes of the country will be unable to work without power.  The morale of the Japanese people will be strongly affected by a lack of access to electricity.

In the areas hit by the tsunami, recovery is going to take between 1-4 years depending on the area.  Japan has been a nation that has relied upon wasteful government spending in the form of massive construction projects for over 20 years in order to prop up the Japanese economy.  Now when the rebuilding takes place it will be to genuinely rebuild necessary structures.  Thus, ironically, the crisis will likely lead to productive economic growth in the form of getting back to some semblance of normality over the next few years.

The affect of the Japanese disaster on the rest of the world is unlikely to result in a double-dip recession.  In fact, Japan’s increased need for fuel, cement, and other raw materials will likely have the effect of boosting GDP for producers of construction commodities.  Unfortunately, what this means is that commodities prices are likely to rise, including oil, steel, copper (think: pipes and electronics), cement, and lumber.

I am expecting that there will be a large drop in the financial markets worldwide of between 2-5% in the short-term.  I would take advantage of any dips greater than 2% to purchase shares in businesses, or in an index fund.  As soon as the situation stabilizes in Japan, and it will eventually (my intuitive assessment is within 2-3 weeks), that the financial markets will begin to focus on something other than Japan.  Think: first quarter earnings season in the U.S.

Key Elements of the Crisis to Focus On

1. The crisis was terrible but manageable before the nuclear power plant had a core meltdown and the other nuclear plant nearing meltdown.  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.  The primary sources of the sense of chaos in Japan are these two plants.  They are also responsible for the lack of cohesion and unification in the people.  Once these two events stabilize then the nation will be able to start the long rebuilding process. If the other plant melts down then the crisis has the potential to turn into short-term anarchy.
2. The health effects of the two nuclear plants, one already having experienced meltdown, and the other nearing meltdown, will determine the nature and length of the recovery in Japan.
3. What is going to happen in the Middle East now?  There have been strong indications of Iranian meddling in the various “revolutions” taking place in this volatile region.  Are the Iranians so crass, cynical and power hungry to take advantage of a distracted world?  I’m not certain.  It feels as if to me that the Iranians have lifted their finger off of the Middle Eastern crisis lever for now.  However, it also feels as if to me that they still are leaving their options about creating more stress in the Middle East on the table.

As a global citizen, not just a citizen of the United States, I sincerely am hoping for a gentle, elegant resolution to the Japanese crisis.  I will keep you apprised of any changes that I sense.

Jason