Level 7 Market Fear
Research for Online Investors

by John Dalt

4/12/11

The market is off sharply this morning.  It is following the lead of Asian markets that closed down more than one percent.  Markets were shocked by the uncertainty from Japan increasing the severity rating of the nuclear accident that occurred a month ago.

Japan raised the rating of the nuclear accident at the Fukushima Daiichi plant to “Level 7” early this morning.  They had previously assigned a “Level 5” to the accident.  The International Atomic Energy Agency (IAEA) identifies a “Level 5” accident as one that has a “limited release of radioactive material and with several deaths.”  A “Level 7” accident means a major release of radiation with widespread health and environmental impact.

Reuters interviewed John Price, a nuclear expert and former member of the UK’s National Nuclear Corp.  Mr. Price said, "Although the level has been raised to 7 today, it doesn't mean the situation today is worse than it was yesterday, it means the event as a whole is worse than previously thought."

A fire was discovered at the number four reactor early this morning and quickly put out by emergency workers.  Raising the nuclear accident to a “Level 7” puts the Japanese crisis on par with the accident at Chernobyl.  Murray Jennex of San Diego State University said, “It’s nowhere near that level.  Chernobyl was terrible, it blew and they (Russia) had no containment, and they were stuck.  Their (Japan’s) containment has been holding, the only thing that hasn’t is the fuel pool that caught fire.”

Markets are trying to price the cost of the tsunami and nuclear accident in terms of reconstruction and lost productivity.  Japan’s economics minister hit the nail on the head.  He warned that damage will most likely be worse than previously expected.  Future power shortages will cut into the manufacturing sector.

Japan’s Prime Minister, Naoto Kan appealed to opposition political parties to work together to draft and pass reconstruction plans.  The earthquake and tsunami killed up to 28,000 people.  The Japanese government places the price tag at $300 billion, making it the world’s most expensive disaster.

Toyota President, Akio Toyoda, told CNN that the company has no intention of moving production out of Japan.  Toyota produces seven million vehicles worldwide, about three million are manufactured in Japan.  He acknowledged that the disaster is impacting the supply chain for automakers worldwide, as rolling blackouts have affected Japanese suppliers.

The news today drove stocks down.  Crude oil is selling off on the possibility that tensions in the Middle East may be waning.  Gold and silver are down after a terrific run.  It looks like we will have our fourth day down in a row.  All natural and to be expected.  Markets go up and down.  We had been up for three weeks prior…with only three down days from 3/17 to 4/6.  It is a time to be cautious, but do not fearful!

Do you have your list of stocks to buy, and at what price?  We do in the Long-Term Portfolio.  Our subscribers picked up a great company yesterday with a billion dollars on their balance sheet this morning, and long term contracts for their product.  It hasn’t been this cheap since last October.  You might still be able to buy it under our buy price tomorrow, if you join tonight.

Quote:
The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable.---Warren Buffett, #3 on our list quote in Investor Resources .

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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