The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

Via Indexed:

There’s no such thing as a know-it-all.

As I noted last week, reactors 1, 2 and 3 all melted down within hours of the Japanese earthquake.

On Monday, Mainchi Daily News provided an important tidbit:

A meltdown occurred at one of the reactors at the Fukushima No. 1 Nuclear Power Plant three and a half hours after its cooling system started malfunctioning, according to the result of a simulation using “severe accident” analyzing software developed by the Idaho National Laboratory.

Chris Allison [a former manager and technical leader at Idaho National Laboratory], who had actually developed the analysis and simulation software, reported the result to the International Atomic Energy Agency (IAEA) in late March. It was only May 15 when Tokyo Electric Power Co. (TEPCO) admitted for the first time that a meltdown had occurred at the No. 1 reactor at the Fukushima nuclear plant.

According to Allison’s report obtained by the Mainichi, the simulation was based on basic data on light-water nuclear reactors at the Laguna Verde Nuclear Power Plant in Mexico that are about the same size as that of the No. 1, 2, and 3 reactors in Fukushima.

According to the simulation, the reactor core started melting about 50 minutes after the emergency core cooling system of the No. 1 reactor stopped functioning and the injection of water into the reactor pressure vessel came to a halt. About an hour and 20 minutes later, the control rod and pipes used to gauge neutrons started melting and falling onto the bottom of the pressure vessel. After about three hours and 20 minutes, most of the melted fuel had piled up on the bottom of the pressure vessel. At the four hour and 20 minute mark, the temperature of the bottom of the pressure vessel had risen to 1,642 degrees Celsius, close to the melting point for the stainless steel lining, probably damaging the pressure vessel.

In other words, the IAEA knew in late March that there was a meltdown. The IAEA informs all of its member states of important nuclear developments.

Government agencies sat on this information, and the world didn’t learn the truth until the operator of the stricken reactors itself made the announcement a month and a half later.

This is not entirely surprising given that governments have been covering up nuclear meltdowns for fifty years to protect the nuclear industry.

H/t: Ex-Skf

With the FT reporting that the head of the EFSF is saying that Asia, particularly China, will be good size buyers of debt the EFSF will issue to finance the bailouts, the bonds of Portugal, Greece, Ireland, Spain and Italy are mostly higher with yields down. The euro is getting a lift as a result but also is getting helped out by tough inflation talk from ECB members who continue to separate their monetary policy with the fiscal troubles in the region. Draghi, the likely new ECB head in Nov, said “there is a greater need to proceed with monetary policy normalization.” Trichet said there are “upside risks to medium term outlook for price stability.” The market reaction to the weak US$ has begun to splinter over the past few weeks with today clear evidence of that as commodity’s are lower on the economic slowdown theme. The Shanghai index fell for a 6th straight day but other Asian markets bounced from multi month lows. In the US, individual investor sentiment remained on the cautious side as the AAII said Bulls were little changed at 25.6 as were Bears at 41.4.

On Monday evening, I sat down to watch “Too Big to Fail” — HBO’s adaptation of Andrew Ross Sorkin’s best selling book of the same name. Sorkin’s magnum opus does not attempt to explain why the crisis happened; but rather, detail the specifics of what happened. Day by day, bank by bank, the crisis is unveiled through the stories of various bankers, Fed and Treasury officials.

As a piece of entertainment, I strongly recommend it. It is a fantastic ensemble cast filled with terrific actors. William Hurt as Hank Paulson is simply riveting. James Woods turns Dick Fuld into a comtemptable, clueless jackass. Paul Giammatti plays Ben Bernanke with a viciously dry wit I did not know the Chairman possessed. The rest of the cast is every bit as good.

As someone who followed the crisis closely, the movie depiction of the parties involved gets the standard Hollywood over-simplification and glamorization. Its a ragtag team brought together to fight incredible odds against evil, uncontrollable forces. We should expect a mash up turning this into the Lord of the Rings any day now.

Jesse Eisinger makes the following wry observation about the film version:

“The movie is set up in the Hollywood conventional way: A gang of misfits, each with a special expertise, is brought together for an impossible mission. There’s Treasury Secretary Henry Paulson, steely eyed at the moment of truth. There’s New York Federal Reserve head Timothy Geithner, the athlete (he doesn’t just jog, but also plays what appears to be squash). And then there’s Federal Reserve chairman Ben Bernanke, the professor with a heart of gold and secret knowledge of the Great Depression.

Ostensibly it’s a story of their success against all odds. Michael Kinsley, reviewing the movie in the New York Times, labeled Hank Paulson the “hero” of the account.

Except that the movie actually depicts something entirely different: failure upon failure. “Too Big To Fail” The Movie isn’t the story of how the Three Musketeers saved the global economy. It’s a story of how the three didn’t see the financial crisis coming; hadn’t prepared for it; made mistake after mistake as it was cresting; and then, in their moment of triumph, made their most colossal blunder of all.” (my emphasis)

In his Pro Publica article, Eisinger explains in far greater detail the subtext which the film almost inadvertently slips in.

I strongly recommend you see the movie; it is terrific entertainment. But I also suggest that afterwards, you plow through Eisinger’s full review — just so you understand what is fact and what has been fictionalized for your entertainment . . .

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Source:
In HBO’s ‘Too Big to Fail,’ the Heroes Are Really Zeroes
Jesse Eisinger
ProPublica, May 25, 2011 
http://www.propublica.org/article/in-hbos-too-big-to-fail-the-heroes-are-really-zeroes

The crossover is one of the most lethal offensive moves in the N.B.A. Miami’s Dwyane Wade found inspiration for his version from players like Allen Iverson and Tim Hardaway.

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Source:
Buy Health Care and Consumer Staples: John Roque
Jeff Macke
Yahoo Tech Ticker, May 25, 2011
http://finance.yahoo.com/blogs/breakout/buy-health-care-consumer-staples-john-roque-130625955.html

Scribd: Screen capture, last hour of Facebook wall

Video: Chairman McHenry Calls Elizabeth Warren a Liar at Subcommittee Hearing

Facebook: Congressman McHenry’s Facebook Wall

Mark Haines
May 25, 2011
David R. Kotok

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Over the years, it has been my personal privilege to be with Mark Haines many times. In earlier times, we talked about stocks and bonds when Mark anchored Squawk Box. More recently there were conversations on Squawk on the Street. ETFs were added to the lexicon. We interviewed with Mark and Melissa Lee and numerous times with Mark and Erin Burnett.

Often I would see Mark before the show while waiting on the security folks at the New York Stock Exchange. Mark would say something like “You know I can’t take you in. I do not make the rules.” The greeting was genuine. The irascible demeanor gave way to a more practical and humane one.

Mark Haines could cut right to the key point in an interview. He would interrupt directly if he thought there was too much “bull” flowing. On the other hand, he would let you go if he thought you were making a key point. I recall a long stretch when I was citing some data on the high costs of the ethanol subsidy. Mark gave me the extra minute to complete the point. Off camera he was asked why and said something like “He [meaning me] was saying something that needed to be said.”

When he growled, I never thought it would turn into a bite. When he was short on time, I understood. I always looked forward to those three minutes at the NYSE and that interview with Mark Haines.

You are a unique personality, Mark Haines, and you will be sorely missed. May you now rest peacefully.

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David R. Kotok, Chairman and Chief Investment Officer

Via the The Economist, consider the chart below covering faith in the free markets. It is at present at a low in the US, the world’s biggest free-market economy:

In 2010, 59% of Americans asked by GlobeScan, a polling firm, agreed “strongly” or “somewhat” that the free market was the best system for the world’s future. This has fallen sharply from 80% when the question was first asked in 2002. And among poorer Americans under $20,000, faith in capitalism fell from 76% to 44% in just one year. Of the 25 countries polled, support for the free market is now greatest in Germany, just ahead of Brazil and communist China, both of which have seen strong growth in recent years. Indians are less enthusiastic despite recent gains in growth. Italy shows a surprising fondness for markets for a place that is uncompetitive in many sectors. France under a third of people believe that the free market is the best option, down from 42% in 2002.

I wonder if the unbridled embracing of Free Market ideals, taken to excess the past few decades — self-regulation, Efficient Market Hypothesis, radical deregulation, which were eventually followed by the massive financial collapse and subsequent government bailouts of girlie men bankers – might have anything to do with this?

Fascinating stuff . . .

The Economist