Comment, analysis and other offerings from Wednesday’s FT,
Of the pain and anxiety of the human beings buffeted by the forces of nature, I will not write. Yet the need to assess the consequences for Japan and the rest of the world remains, says the FT columnist. The economic disruption this time will be more severe than in the Kobe earthquake 1995, partly because of the interruptions in electric power. Some outsiders do wonder whether Japan’s government can afford additional spending for the quake costs. They need not do so: Japan can and unquestionably will pay these relatively modest sums.
Gillian Tett: Japan supply chain risk reverberates globally
With many Japanese factories facing temporary or partial closure, the earthquake has left investors facing an uncomfortable truth, writes the FT columnist: in the modern world, it can be tough to assess how convoluted cross-border linkages really work, in manufacturing as in finance. Many of the vulnerabilities in these chains remain unaddressed, and are poorly understood.
John Kay: Why we struggle with our roulette wheel world
Occasionally, a conversation changes the way you think, the FT columnist writes. More than 20 years ago, a Lloyd’s underwriter told me: “The threat to this market is not a Japanese earthquake. We know that will happen. The threat comes from the risks we never imagined.” This year’s headlines have been filled with sensational events. But all of these possibilities should have been on the screens of anyone scanning the future, and each type of event occurs with a degree of regularity. They are all unexpected only in a probabilistic sense.
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Analysis: Brazil — a platform for growth
Already estimated to contain 50bn barrels, and with much still to be fully explored, Brazil’s deepwater fields contain the world’s largest known offshore oil deposits, reports the FT’s Joe Leahy. In one step, Brazil could jump up the world rankings of national oil reserves and production, from 15th to fifth. So great are the discoveries, and the investment required to exploit them, that they have the potential to transform the country – for good or for ill.
Business Life: The other ‘Silicon Alley’ insiders
When John Borthwick and Andy Weissman joined forces four years ago to build social media companies on the internet, they were not sure about how to proceed, the FT’s John Gapper reports. The pair were either visionary or lucky. Their fund, Betaworks, has found itself in the right place – New York – just as venture capital funds are pouring money into social media start-ups in the hope of mimicking the success of Facebook and Twitter, and Manhattan’s so-called “Silicon Alley” is expanding fast.
Lex on catastrophe and the power of panic
Markets are bad at valuing low-probability extreme events. Put differently, investors often respond to a radical increase in uncertainty with panic, Lex says. It is hard to stand still when the Middle East is in turmoil or when there is risk of a Japanese nuclear catastrophe; let alone both simultaneously. Usually it is clever to get well in front of a stampede. But mass movements of money are a dangerous business.
Short View: Correction opportunity
There is only a minuscule chance that Japan’s Fukushima Daiichi nuclear plant will turn into a new Chernobyl. The markets are doing a terrible job of trying to price the tiny risk of that disastrous outcome, as they always do for so-called “black swans”, the FT’s James Mackintosh says. In the run-up to the US subprime crash, outcomes seen as highly unlikely were ignored. In Japan, the market has done the opposite.
Lombard: Why we should continue to believe in Libor
Upsetting. That is the only word to describe allegations that manipulation may have distorted London interbank offered rates, the reference indices for financial contracts worth trillions, says the FT’s Jonathan Guthrie. It is like hearing that St Paul’s Cathedral – another part of the City’s enduring infrastructure – may have been jerry built by Sir Christopher Wren using knocked-off mortar.
Japan Live Blog: Day six
The FT’s live blog of the Japanese earthquake response continues, drawing on our correspondents around the world. Today on the blog — analysis of plans to use helicopters to drop water on the stricken Fukushima reactors, international moves to track radiation from the plant, and the Nikkei rallying above 9,000.