The Big Picture

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• Japan Plummets 5%; BoJ Injects $146B
• FDIC Bank Failures
• Losing it on 60 Minutes: The Great “Walk-Offs”
• Deficits Buster: Pentagon’s Biggest Boondoggles
• Help Japan
• Clawbacks: Ending Wall Street’s IBGYBG Bonuses
• Earthquake-Tsunami-Reactor
• iPad? What If You Bought Apple Stock Instead?

Japan Plummets 5%; BoJ Injects $146B Posted: 13 Mar 2011 08:40 PM PDT Japan is getting shellacked — earthquake, tsunami, partial nuclear meltdown, and now stock market whackage. Here’s Bloomberg: BOJ Pours Record $146 Billion Into Financial System After Quake “The Bank of Japan poured a record 12 trillion yen ($146 billion) into the world's third-biggest economy today as the strongest earthquake in the nation's history triggered a plunge in stocks and surge in credit risk. The yen fell after the central bank added funds to the financial system, reversing earlier gains against the dollar on speculation authorities would sell the currency to aid exporters. Governor Masaaki Shirakawa yesterday said he is ready to unleash "massive" liquidity to support markets . . . Japan faces power blackouts, the risk of meltdowns at a nuclear power station, and a predicted death toll of more than 10,000 after the 8.9-magnitude temblor and subsequent tsunami devastated northeastern regions. More than 350,000 people are in emergency shelters. The central bank, meeting from noon in Tokyo, may respond to the disaster with tools other than policy rates, already cut to near zero to counter deflation.” You can make donations to rescue efforts in Japan here.

FDIC Bank Failures Posted: 13 Mar 2011 05:30 PM PDT Another few takeover the past week: > ~~~

Losing it on 60 Minutes: The Great “Walk-Offs” Posted: 13 Mar 2011 04:26 PM PDT March 13, 2011 In this video, compiled by “60 Minutes Overtime,” you’ll hear the back-stories of our favorite walk-offs from the past 40 years. In 2007, French president Nicolas Sarkozy stormed away and left Lesley Stahl asking, “Pourquoi?” Steve Kroft remembers a walk-off performed with “verve” by Russia’s Minister of Atomic Energy and a funny attempted walk-off by Edward Teller, father of the H-bomb, during a Mike Wallace interview. You’ll also see the late Senator Daniel Patrick Moynihan, former presidential candidate Ross Perot, and former Russian president Boris Yeltsin all stomp off in a huff. ~~~ Source: Losing it on 60 Minutes: the great “walk-offs” CBS, March 13, 2011 6:38 PM http://www.cbsnews.com/8301-504803_162-20042200-10391709.html

Deficits Buster: Pentagon’s Biggest Boondoggles Posted: 13 Mar 2011 12:30 PM PDT Wanna get serious about the deficit? Consider these issues: 1) Eliminate agricultural subsidies 2) Slash corporate giveaways/welfare 3) Deal with skyrocketing medical costs, Medicare/Medicaid 4) Cancel unfunded tax cuts Oh, and the cold war is over for decades now — how about we rein in wanton Pentagon spending? > > Source: The Pentagon's Biggest Boondoggles By JOHN ARQUILLA and FOGELSON-LUBLINER NYT, March 13, 2011 http://www.nytimes.com/2011/03/13/opinion/13arquilla.html

Help Japan Posted: 13 Mar 2011 09:59 AM PDT Signal Noise has this poster for sale — all profits will be donated to help Earthquake/Tsunami relief efforts in Japan. In the USA, you can text REDCROSS to 90999 to donate $10 . . . >

Clawbacks: Ending Wall Street’s IBGYBG Bonuses Posted: 13 Mar 2011 09:00 AM PDT My Sunday Washington Post column discusses the lack of accountability of the Wall Street execs smashed and grabbed, destroyed their own firms, and crashed the economy. It also describes how to fix this issue: Putting an end to Wall Street’s ‘I’ll be gone, you’ll be gone’ bonuses. Here’s an excerpt “How did this happen? Some people blame excessive greed; others say crony capitalism is at fault. I believe we can sum it up in one word: Liability. In recent years, there was no legal liability for extreme recklessness. Take a healthy company, roll the dice and if it comes up snake eyes, all you lose are your unvested stock options. Most management does not have significant capital at risk. The cost for pushing a healthy firm into insolvency by excessive risk-taking is some snickering at the golf course. In terms of lost monies, it is minimal. You might be surprised to learn that it was not always this way. Before these firms went public in the 1970s and 1980s, bank management had full liability for their firm’s losses. During the era of Wall Street partnerships, if employees were so reckless as to lose billions of dollars, the partners were on the hook for the full amount. This meant that after the firm was liquidated to pay its debts, the partners’ personal assets were next on the auction block: Houses, cars, boats, even watches were sold to satisfy the debt.” Give the full column a once over. By coincidence, in Saturday’s WSJ, Liz Rappapport had an article titled Lehman Probe Stalls; Chance of No Charges with this very helpful chart: > click for larger chart The need for liability for collapsing your firm in pursuit of bonuses driven by fraudulent profits is increasingly apparent . . . > Source: Putting an end to Wall Street’s ‘I’ll be gone, you’ll be gone’ bonuses Barry Ritholtz Washington Post, March 12, 2011; 6:08 PM http://www.washingtonpost.com/wp-dyn/content/article/2011/03/12/AR2011031204299.html

Earthquake-Tsunami-Reactor Posted: 13 Mar 2011 08:50 AM PDT Earthquake-Tsunami-Reactor David R. Kotok March 13, 2011 > “We are assuming that a meltdown has occurred.” –Yukio Edano, Japan's Chief Cabinet Secretary, describing his latest position on the quake-damaged nuclear reactor. > Japan is the world's third largest economy (used to be second) and is experiencing its worst shock since World War II. The irony of history is that the shock involves radiation and peaceful nuclear power generation in a nation that has uniquely suffered the effects of atomic war. Like others, we can only watch these events unfold. We witness the progression of reactors getting scrutiny. We see the collision between the fierce 5000° Fahrenheit inferno and the fragility of human-attempted cooling. This drama plays on a global stage. And of course, we wish for the safety of personal friends, strategic allies, and innocent strangers who are victims. Our email to Japan is presently unanswered. This is also an energy price shock. It starts in Japan, of course, where the nation has lost 10% of it electric power. For the rest of the world there is now an additional demand for substitute energy. That piles on the Middle East and North Africa (MENA) oil price shock. For nuclear power evolution, another setback has occurred that will be measured in years and billions. This earthquake-induced nuclear failure appears to dwarf Chernobyl and Three Mile Island. The sad lesson of history is that malevolence in Tehran or Pyongyang is not likely to be tempered by this event. Will a meltdown in transparently peaceful Japan restrain the nuclear development that is flowering in opaquely dark North Korea and Iran? They have perfidious intentions. Restraint? We doubt it. Investment and market implications are huge. Of course there is a global substitution effect. Nuclear loses in the near term. Conventional oil, natural gas, and coal are the winners. Finance tied to nuclear gets more risky, and incentives may be applied to the others. As for the US, we have very low expectations. Our energy policy is an absolute mess. Our Congress is intractably deadlocked and polarized. It works to the detriment of our country. In other nuclear-powered countries, this will trigger reexaminations. France is a key player since it has greatly expanded its nuclear use and substituted nuke power for coal. Keen eyes will look to Europe to see what now will be done for enhanced safety and how it is implemented. We expect another European generation to develop technological improvements in reactor containment. In Israel, there are already alls for reexamination of the Dimona reactor which was built in the 1950s. Israel is in an earthquake-prone geography. We believe there is a time coming when Japan will be attractive for investments. It is not today. It may be soon or it may be delayed. Natural catastrophes can lead to massive rebuilding. Will this country that has promulgated QE 1-2-3-4-5-6 be able to finance? Will they finally turn from depressing deflation to mild inflation? If yes, what will happen to their two-decade-old very low interest rates. How will they handle the labor force pressure in their aging society? Does their high debt-GDP ratio impair their ability to cope with the crisis? There are many questions. We will stop for now. It has already been a busy weekend for Cumberland. Look for some forthcoming views from our Chief Global Economist, Bill Witherell – if I leave him alone long enough to write them. The portfolio work must come first. The missives will follow in due time. ~~~ David R. Kotok, Chairman and Chief Investment Officer, Cumberland Investments

iPad? What If You Bought Apple Stock Instead? Posted: 13 Mar 2011 05:19 AM PDT Thinking about buying a new iPad 2 or Powerbook? Consider this table below, via Kyle Conroy. It shows what that purchase would have been worth if you had bought AAPL instead of their product and held it to today: > > Apple Product Release Date Original Price Stock Value Today PowerBook G3 250 (3500) 1997-11-10 $5700 $330,563 Mac Server G3 266 Minitower 1998-03-02 $4499 $214,141 Mac Server G3 300 Minitower 1998-03-17 $4999 $205,444 Power Macintosh G3 266 Minitower 1997-11-10 $3000 $173,981 PowerBook G3 292 (Wallstreet) 1998-05-06 $4599 $164,320 Mac Server G3 233 Minitower 1998-03-02 $3349 $159,404 PowerBook G3 300 (PDQ – Late 1998) 1998-09-01 $4999 $158,720 Mac Server G3 333 Minitower 1998-09-01 $4599 $146,020 Power Macintosh G3 233 Desktop 1997-11-10 $2400 $139,185 Power Macintosh G3 233 Minitower 1997-11-10 $2400 $139,185 Power Macintosh G3 266 Desktop 1997-11-10 $2400 $139,185 PowerBook G3 266 (PDQ – Late 1998) 1998-09-01 $3499 $111,094 Mac Server G3 400 (Blue & White) 1999-01-05 $4999 $125,012 Mac Server G3 450 (Blue & White) 1999-06-01 $4999 $120,882 PowerBook G3 250 (Wallstreet) 1998-05-06 $2979 $106,438 Power Macintosh G3 300 Desktop 1998-03-17 $2750 $113,017 Power Macintosh G3 300 Minitower 1998-03-17 $2399 $98,592 PowerBook G3 233 (PDQ – Late 1998) 1998-09-01 $2799 $88,869 Mac Server G3 350 (Blue & White) 1999-01-05 $3299 $82,499 PowerBook G3 233 (Wallstreet) 1998-05-06 $2299 $82,142 > That is only the first 20; a huge table is at KYLE CONROY DOT COM Of course, this doesn’t work with every company. You could have purchased stock in GM, Wang or Planet Hollywood instead of buying their products . . .

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