By PRIONSIAS O'MAHONY
JAPAN OVERSHADOWS ALL:One story has dominated the financial markets this week - the terrible events in Japan. Some stats:
Nikkei futures were 16 per cent lower at one stage on Tuesday. The index eventually closed "only" 10.5 per cent lower, which was the second-worst one-day performance since the 1987 crash. The Nikkei moved by one annual standard deviation in just three days. Having lost a quarter of its value since peaking last year, it is now in an official bear market.
Catastrophe modelling firm AIR Worldwide estimates insurers will lose between $15 billion and $35 billion. S&P warns the damage "could wipe out a year of earnings".
It now costs $125,000 to insure $10million of Japanese debt against default - a record for Japan, whose national debt is 200 per cent of GDP, although the cost of insuring Irish debt remains almost five times higher.
HOPES FOR REBOUND:Despite the headlines, bulls see reasons for hope. Nomura analysts see a market overreaction, estimating an ultimate cost of about $100 billion, which mirrors the cost of Hurricane Katrina in the US. Then, indices fell by 5 per cent before rebounding by 10 per cent.
Japan's Kobe earthquake in 1995 saw markets fall by 7 per cent in the first week, 15 per cent within three months and 25 per cent within six months, other analysts note, but all the losses were recovered by year's end.
The swoon induced by the September 11th attacks in 2001 was also erased within months. In fact, Ned Davis Research looked at the 28 worst crises since 1940 and found US markets were higher within six months in 19 of the cases.
SOME SENSITIVITY PLEASE:American analysis of the Japanese tragedy has been a trifle insensitive at times. Controversial Fox News host Glenn Beck laughed off the media's supposed overreaction, warning that corrupt lefties like billionaire George Soros were attempting to further their own anti-nuclear agenda (Soros actually bought 968,000 shares in the US's second-largest operator of nuclear power plants in 2009).
Beck later warned that the tsunami was a "message from God" because "the things we are doing really suck".
Meanwhile, CNBC's Larry Kudlow appalled viewers after awkwardly expressing relief regarding the initially blasé market reaction. "The human toll here looks to be much worse than the economic toll and we can be grateful for that," he said.
Hedge fund manager and MarketWatch commentator Jonathan Hoenig, who is bullish on Japan, was more concerned about his portfolio. "A sustained break below 9000 on the Nikkei 225 would frighten me even more than the horrific images of washed away towns," he wrote.
Not exactly bleeding hearts, are they?
