Tuesday's Top 10 with NZ Mint: Panic in Japanese markets as radiation rises in Tokyo; 10% of Japanese capital stock may be destroyed; Radiation debate; Dilbert

Here's my Top 10 links from around the Internet at 10 to 7 pm in association with NZ Mint.

I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.

I'll pop the extras into the comment stream.

This Japan situation looks very serious. There was a hint of panic on global markets today. Haven't seen it like this since May last year during the Greek meltdown and in September 2008 when Lehman collapsed.

1. Japanese market panic - The Nikkei fell a shocking 16% this afternoon after initial signs of elevated radiation levels in Tokyo. Here's Bloomberg.

The Nikkei has now fallen 24% since February 21. That is a crash in anyone's language.

I wonder if it might be overdone though.

See below for a link to a detailed view of why the nuclear fallout fears might be over the top.

But the mere hint of higher radiation levels in Tokyo was enough to spook the market.

Remember though this a stock market that has crashed many times over the last 20 years. If you think New Zealanders don't trust their stock market, have a chat to the Japanese.

Their disillusion is 20 years old.

“The market’s chaos won’t calm down unless the BOJ will take more bold actions,” said Susumu Kato, chief economist for Japan at Credit Agricole CIB and CLSA in Tokyo. “A further plunge in stocks will pressure the BOJ into additional easing.”

While the central bank said after its policy meeting yesterday that the economy remained on course to emerge from its fourth-quarter slump, risks to consumer confidence intensified with the government’s failure to contain a crisis at a nuclear power plant. Prime Minister Naoto Kansaid in a televised address that the threat of further radiation leaks is rising.

2. More supply is coming - Bloomberg reports how US dairy farmers are cranking up output to take advantage of record prices, which is likely to push prices down in future. One for Fonterra farmers and their bankers to think about as they forecast the future.

These high prices may not last forever. Best to repay debt now while you can.

The milk rally that sent prices up 48 percent this year, more than any agricultural commodity, may be ending as farmers respond with record production and the costliest cheese in a quarter century curbs demand.

Output in the U.S., the world’s second-largest producer, may rise 1.7 percent to 196 billion pounds in 2011, enough to fill about 34,500 Olympic-sized pools, the Department of Agriculture estimates. Demand will weaken as restaurants cut promotions and grocers raise prices, said INTL FCStone Inc., a New York-based broker. Futures may drop 14 percent to $16.86 per 100 pounds by Dec. 31, a Bloomberg survey of 10 analysts showed.

Shawn Hackett, the president of Hackett Financial Advisers, who correctly projected in October that milk would surge, now says prices may fall as low as $15 amid higher output in Australia and New Zealand, the largest exporter.

Riots have erupted from Bahrain to Morocco, in part fueled by food costs the United Nations says reached a record last month. Protests already toppled leaders in Egypt and Tunisia. The projected drop in milk prices will do little to relieve the surge in food inflation that the World Bank says helped drive 44 million more people into extreme poverty since June.

3. Stagflation and a double dip - Nouriel Roubini writes here at Project Syndicate in a typically gloomy way about the Middle Eastern turmoil and how it increases the risk of stagflation and a double dip recession.

Just what we need. Talk about a buzz kill.

The transition from autocracy to democracy in the Middle East is likely to be bumpy and unstable, at best. In countries with pent-up demand for higher income and welfare, democratic fervor could lead to large budget deficits, excessive wage demands, and high inflation, ultimately resulting in severe economic crises.

So a bold new assistance program should be designed for the region, modeled on the Marshall Plan in Western Europe after WWII, or on the support offered to Eastern Europe after the collapse of the Berlin Wall. Financing should come from the International Monetary Fund, the World Bank, the European Bank for Reconstruction and Development, as well as from bilateral support provided by the US, the European Union, China, and the Gulf states. The goal should be to stabilize these countries’ economies as they undertake their delicate political transitions.

4. Don't panic, says an expert - MIT research scientist Josef Oehmen posted here at BusinessInsider a detailed piece explaining why the reactor at Fukushima won't melt down in a Chernobyl sort of way. It's well worth a read and it all seems plausible.

It's a welcome grain of salt to take with all the extreme headlines floating around at the moment.

I repeat, there was and will *not* be any significant release of radioactivity from the damaged Japanese reactors.

By "significant" I mean a level of radiation of more than what you would receive on - say - a long distance flight, or drinking a glass of beer that comes from certain areas with high levels of natural background radiation.

5. How radiation might spread - Dr Jeff Masters' Wunderblog (seriously) has a lot of detailed information and a handy chart on how radiation might spread.

6. Treasury bond yields slump - Bloomberg reports the US 10 year bond yield fell 15 basis points to 3.21%.

“The market is moving aggressively,” said Colin Embree, Singapore-based head of fixed-income trading and sales at Bank of Nova Scotia Asia Ltd., a unit of Canada’s third-largest lender.

“This isn’t a flight to quality. It’s a flight from disaster. The moves tend to be quite violent.”

7. Twice as expensive as Kobe? - Reuters reports Economists are revising up their loss forecasts for the Sendai earthquake and Tsunami to 3% of GDP, twice as much as the Kobe earthquake in 1995 cost and more than twice the relative cost of the Christchurch earthquake to the New Zealand economy. HT David via email.

It could lead to repatriation.

Who will buy all the bonds being sold by the US and European governments? Or the New Zealand government for that matter?

Moody's warned the crisis may bring forward the tipping point on foreign investor confidence on Japanese debt. Gee thanks.

The world's third-largest economy, already saddled with public debt double the size of its $5 trillion output, must rebuild its infrastructure -- from roads and rail to power and ports -- on a scale not seen since World War Two. Moody's Investors Service warned on Monday the huge financing needs Japan faces may erode investor confidence in the country's ability to repay its debts, forcing up borrowing costs.

"The earthquake may have shifted such a potential tipping point a bit forward, unless Japan's political parties are galvanized by the crisis to also address the country's long-term fiscal challenges," Moody's lead analyst Tom Byrne said in a statement.

Vanessa Rossi, senior research fellow at London-based think-tank Chatham House, estimates that 10 percent of Japan's capital stock was lost in the earthquake, which equates to around 20 percent of the country's GDP, or $1 trillion.

"The bigger cost is rebuilding of capital stock. This type of problem really causes damage to capital stock. There's enormous damage to infrastructure -- installations, power plants, housing, factories, ports, coastline," Rossi said.

"You couldn't possibly rebuild so extensively in the period of 1-2 years. I expect it would be 4-5 years of work."

She also said Japan's rich private sector was likely to supplement the debt-ridden government by selling its overseas assets and possibly using foreign exchange reserves, which could weigh on international markets.

8. Wikileaks vs Bank of America - A group of hackers allied to Wikileaks has just dumped a bunch of emails about Bank of America. This may be the bunch that Julian Assange suggested would bring down an American bank. Doesn't look like it at this stage, but interesting nontheless. Here's the NYTimes on it.

The leaked Bank of America emails indicate that Bank of America improperly foreclosed on several homes during the height of the financial crisis in 2008 that began one of the worst recessions since the great depression.

The report came from a former employee with Balboa Insurance — a risk management and insurance firm. The employee reportedly corresponded with Bank of America employees and was told to falsify loan numbers on documents to force Bank of America to foreclose on homeowners.

9. 'US$7.5 mln is still poor' - Bloomberg reports a survey of millionaires in America by Fidelity found that they didn't really feel rich until they had more than US$7.5 million.

Lucky for some...

“Wealth is relative, and to some extent the more you have the more you realize how much more you need,” said Sanjiv Mirchandani, president of National Financial, a subsidiary of Boston-based Fidelity, that provides clearing and custody services to broker-dealers, in an interview before the survey’s release today.

The more than 1,000 households surveyed had an average of $3.5 million in investable assets. About 42 percent said they don’t feel wealthy, saying they would need about $7.5 million to feel rich. The 58 percent of respondents who said they do feel wealthy were younger on average and have a greater number of remaining years in the workforce, said Mirchandani.

10. A video about Middle Class Whites (Blues)