Japan Stock Review

OK, this is just a general note about a basic peek at Japanese stocks. Neither broad nor deep.

I’m going to put up a chart of two auto makers, HMC Honda Motor Corp, and TM Toyota Motors along with one electronics company SNE Sony and a broad fund EWJ. These are compared to the benchmark S&P 500. What we see is them fallling off a cliff, a tiny ‘blip’ up, and then a bit more roll down.

Selected Japanese Stocks:  TM, HMC, SNE, EWJ

Selected Japanese Stocks: TM, HMC, SNE, EWJ

You can click the image for a larger version.

It’s pretty clear that things are “not good” yet. RSI is “hit 20” and up some, but needs that second dip and ‘higher low’ before it’s an entry. Prices have dropped way below the SMA stack, so the up run will likely stop at the bottom side of the SMA stack (Usually the 50 day middle line) whenever a bounce in ernest begins. It must CROSS the SMA stack and return to it from the topside to have a new uptrend, untill then, it’s just ‘dropping to bottoming eventually’…

MACD is “way low” below zero and DMI is “red on top” with ADX saying “dropping in force” (though it is a slow indicator so will not call a new up run right at the bottom… still, you want ‘late in, early out’ for maximum safety with gains).

So this thing is saying “it ain’t over yet”. WHY?

Perhaps TEPCO



Japan mulls Tokyo Electric nationalization

On Tuesday March 29, 2011, 2:55 am EDT

By Mariko Katsumura

TOKYO (Reuters) – Japan may nationalize Asia’s largest utility, Tokyo Electric Power (Tokyo:9501.T – News), as it struggles with the financial costs of the country’s worst nuclear disaster, a move that would please bondholders but hurt shareholders who would likely lose out.

Imposing state management is one option that Japan is mulling, National Strategy Minister Koichiro Gemba said on Tuesday, as the costs of compensating businesses and households affected by leaking radiation and the expense of repairing crippled nuclear reactors looked set to soar.

When folks start talking about nationalizing, smart money runs like hell for the border and asks quesitons later. Even if unwarranted, that’s what happens. So TEPCO has lost 70% of it’s market cap on the Tokyo stock exchange and is up to it’s eyeballs in alligators. So much so that nationaliztion is looking like a good option…

Notice the “costs of compensating”. What is the liability of the company for all the evaculations and the rolling blackouts that have come as a consequence of their nuclear failure? Functionally unlimited…

At the same time, the utility’s ability to pay has been hobbled by a fall in generation capacity that is causing rolling blackouts that are expected to last for weeks if not months.

And how do you make cars and semiconductors with rolling blackouts?


Even before compensation claims are filed, the crippled former state-owned utility faces higher costs.

Nomura Holdings analyst Shigeki Matsumoto said this month that TEPCO will have pay more than $1 billion every month on alternative fuels to make up for lost capacity. With reactors likely to be off line for a long time, that expense will mount.

TEPCO took almost two years to restart reactors at its Kashiwaki-Kariwa plant after an earthquake there halted generation in 2007 although the damage was far less severe that at Fukushima, Matsumoto said.

With the Fukushima plant still spewing radiation the eventual bill could easily outstrip TEPCO financial resources. The crisis appeared to escalate in the past few days with plutonium found in soil on Tuesday, rattling already shaky financial markets.

Got that? $1 Billion a month in fuel costs. Perhaps for years. (Ambiguous as to how many reactors will be shut down how long, though)

Tokyo Electric shares were untraded due to a glut of sell orders at 566 yen, down 19 percent from Monday’s close. The company has lost about $30 billion in market value since the March 11 disaster.

The spread on Tokyo Electric’s 5-year credit default swaps widened to a record high of 475 basis points on Monday on Markit, against just 40 points before the crisis.

The utility, which provides power to about one-third of the Japanese population, had 432 billion yen in cash and equivalents at the end of December, according to its financial statements.

Of its roughly $61 billion in outstanding bonds, the company is due to repay $4.8 billion this year, and another $5.6 billion in 2012, underscoring the importance of refinancing to meet its funding needs. ($1 = 81.705 Japanese Yen)

OK, it lost $30 Billion and that was 70%, so what remains us under $15 Billion of market cap. It powers about 1/3 of the country (so a lot of other companies depend on it) and has all of about $5 Billion in the bank. (So hit’s the cash wall in about 4 to 5 months on the added fuel burn alone…) AND it’s got $61 B in bonds and is supposed to cough up another $4.8 Billion to pay off some of them. So the answer is to put that load onto the banking system…

See where this is going? Sweep it under the debt rug?

I don’t think this is going to work out well. So the question then becomes: “For how long will the country be run electrically hobbled on a fuel debt credit card as the government tries to make decisions?”

Yeah, that can make it hard to run a car manufacturing company or ship TV sets…

Watch, don’t touch, other than fast day trades on a 10 day chart.

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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9 Responses to Japan Stock Review

  1. Malaga View says:

    Seems like a lot of stuff could be coming home to roost… on the plus side they have plenty of US Bonds they can offload… and they are experts at running the Quantative Easing scam with the pension funds and development banks… and they have a few international favours they can call in… but on the down side are: Ageing, Bureaucracy, Corruption, Damage, Earthquakes, Fukushima, Globalism, Honourable lies, Inertia, Just in Time, Kickbacks, Leaks, Mount Fuji, National Debt, Obedience, Power Cuts, Quantative Easing, Radiation, Stagflation, Tsunamis, US hegemony, Valetudinarianism, Wreckage, eXclusion Zones, Yen volatility, Zen acceptance…. but who really knows… at the moment I agree with Watch – Don’t touch… but that doesn’t really help because it applies to everything at the moment.

  2. Malaga View says:

    One of the many things that I just don’t get is the Just In Time production strategy… it frequently operates as Just Too Late when times are good… and operates as Just Not Available when the shit hits the fan in the supply chain… I suppose it proves that a) everything is now run by accountants and b) accountants know diddly squat about the real world… and so it goes… I remember going for an interview at a Japanese owned factory… the jump-suited IT guys were really happy because Just In Time had worked for the first time in two years… which meant the IT guys could focus on their IT jobs… no more retro-fitting parts that had arrived Just Too Late… I didn’t take the job… pretending to change reality to fit with their Just In Time philosophy was just too surreal for me :-)

  3. Malaga View says:

    I have wonderful memories of a trip to Tokyo… amazing sights… amazing people.. just an amazing place for me.

    One day I was looking for a clinic where they specialised in ear wax removal [its a long story but I had read about it on the web and was fascinated]… I only knew the name of the clinic (in English) and that it was near a central railway station… but I didn’t know a word of Japanese… and that’s when you find out how nice people are… I spoke some words… mimed some words…. gestured a lot… wrote things down… and Tokyo just responded with smiles, welcomes, helpfulness and practical advice…. so step by step I got closer… and finally a lovely young lady in a department store gave me directions (without any English) for the last part of my journey… she even printed off a street map for me… and I got there in less than an hour… and I even managed to get my ears cleaned :-)

    Now I have tried finding places in several English speaking cities – like London and New York – and it has not always been a charming experience… but Tokyo really charmed me. I was nervous when I walked into a ladies store to buy a Kimono [for she who used to be obeyed]… I was the only guy in the place… and felt out of place – the feeling you get when you are left standing alone by the ladies underwear section while she is in the changing room trying on something that doesn’t fit… but I was charmed again by some lovely ladies… they helped by get the right size and accessories… and then stopped work to give me a demonstration and lessons in how to get dressed in a kimono… another truly amazing experience for me… no English language… just lovely people… you are in my thoughts. Thank you Tokyo. Thank you Japan.

  4. E.M.Smith says:

    @Malaga View:

    I spent two weeks in Tokyo and with the same result. I’ve often said it was the only big city where I ever felt ‘at home’… and I’d move there in a heartbeat.

    I literally felt like if I were walking along dripping $100 bills on the ground the locals would be picking them up and rushing to hand them too me gesturing that my pocket had a hole in it….

    No idea how to reconcile that with the Japan that bombed Pearl Harbor. All I can figure is that the average person is not like their leaders then…

    But, frankly, that willingness to try, to just get things done, and to work well with others; that’s why I think Japan will not collapse. It will “suffer through”, but without the “splat” we go for in the west.

    40 years from now Honda and Toyota will still be selling gigantic numbers of good cars and dominating things. So, IMHO, it’s just a matter of choosing the entry point, not one of ‘watching the fall’…

    Think how bad things were after W.W.II. Look at how they fixed things up. A tsunami on one part of one island and some temporary electricity reductions are not going to destroy their world. (Though a growing China and a nuclear N. Korea might… so that needs watching)

    When I think of my time in Japan, all I want to do is return, and never leave. (But I know I’d not fit in well there… I stick out and “the high nail gets pounded”)

  5. Malaga View says:

    An interesting comment [with my highlight] by chindit13 over at Zero Hedge

    Those of you who have lived in Japan have a pretty good idea of what has been going on and why. You probably have seen the “weeping press conference” a dozen times, each a repeat of the last one save for the names and faces.

    Confrontation in Japan is not good. Causing “confusion” is not good. Following the plan and the rules is everything. The unexpected is invisible. One does not say “sorry”, rather, one says “it is regrettable that…”

    TEPCO probably planned for an 8.5 quake and a five foot tsunami (I’m speculating here.). Perhaps they did not plan for a loss of back-up power. Perhaps they did not plan for a destroyed infrastructure within the vicinity of the plant. When reality fell outside their expectations, they had no plan. At first they could not see reality. Next they could not admit what that reality was. After that they fell back to habit, which is to try to build consensus, deferring to the seniors and elders, even if these “respected” individuals had no clue and the underlings did. After initial discussions, there are reports to write. Then new meetings to discuss the reports. Then suggestions based on the discussion surrounding the reports. Then new reports needed to be written, etc., etc., etc.

    The GoJ could not “embarrass” TEPCO by questioning them or question anything TEPCO was doing. Certainly the GoJ could not tell TEPCO to get out of the way and let someone else take charge. TEPCO did not want to “alarm” the Japanese people or “confuse” them by telling the truth; rather they tried to keep the social order by saying “don’t worry”. Perhaps they themselves did not want to know, so they took no readings. It is not that they were trying to cover their own butts. They really did not want to upset the people by burdening them with the truth, especially at a time of great national suffering. Upsetting people is worse than killing them. This is a fine point, but very real.


    This comment made me reflect… perhaps try to build consensus is the key phrase… but this seems to apply to America and Europe these days… I have worked in many IT departments where the “respected” individuals had no clue and the underlings did… that even seems to apply to many corporations… I guess that explains why outsourcing to India has been so successful… they don’t rock the consensus boat… so I guess that times have changed… perhaps that explains why corporations implode when reality strikes… perhaps that is why so many people say: Excuse me – you must be confusing me with somebody who gives a damn… which all seems to underline the fact many Western countries are about seven supermarket shopping days away from implosion.

  6. Malaga View says:

    @ E.M. Smith
    the average person is not like their leaders
    I think that applies to nearly every country I have visited… huge disconnects.

    I stick out and “the high nail gets pounded”
    I know that feeling… perhaps that’s why Spain works for me.

    I think Japan will not collapse.
    It will “suffer through”, but without the “splat” we go for in the west

    I tend to agree with that… the West is more risky and worrying…
    it’s history is littered with splats and bangs.

  7. R. de Haan says:

    They will need help.
    Japanese mayor disgusted with Government crises response appeals for help to the entire world

  8. E.M.Smith says:

    @Malaga View:

    Interesting points about Japan. And yes, you can see that consensus thing just killing them right now… As much as I love the place, I would not survive working there for long. If something is wrong, I just say “That is wrong” …

    @R. de Haan:

    For that Mayor to do that means they are already past the social breaking point…

    They need to let go of their love of central authority and just start “doing what needs doing”. Have someone fit walk to the nearest city and get someone there to drive back to pick up 8 more folks, repeat until there is a convoy of 1000 vehicles each taking folks out… As the folks arive somewhere, they stet about building a camp…

    “Self Rescue”… it’s all that ever works in really large disasters…

  9. Jason Calley says:

    @ Malaga View “One of the many things that I just don’t get is the Just In Time production strategy… it frequently operates as Just Too Late when times are good… and operates as Just Not Available when the shit hits the fan in the supply chain”

    I have not verified this, but here is a report that Toyota will shut down all North American plants due to lack of parts.

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