>
How traders react to crisis like Japan
> "The gravitational effects of the supermoon"
> Jonathan Ratner Mar 11, 2011
> When great tragedy such as Japan’s massive earthquake strikes,
> traders immediately go bi-polar.
> On the one side, they are empathetic: What can I do? How can we
> help?
> Art Cashin, director of NYSE floor operations for UBS, remembers
> the Oklahoma City bombing in 1995. When the news hit the wires,
> “the hat” was immediately passed around the trading floor and more
> than US$150,000 in cash was raised within ten minutes. A broker
> was on the first flight to Oklahoma City with the cash to be used
> “in the most effective way.”
> But as the hat was being passed, minds were busy at work thinking
> about each consequence and its broader impact on the economy and
> financial markets.
> “This morning the thinking continues at lightening speed,”
> Mr. Cashin said in a note to clients on Friday.
> Longer term, Mr. Cashin thinks the quake may strain global
> liquidity.
> “If Japan must borrow for large or extensive repairs, there may be
> fewer buyers for U.S. or European bonds,” he said, providing a
> glimpse of how traders think as they react to crisis and start to
> price-in unforseen events.
> Traders and financial markets have been dealing with numerous
> “Black Swan” events in recent years, with the Japanese earthquake
> and the ouster of Mubarak from Egypt only the latest.
> Popular commentator Dennis Gartman pointed out that the yen firmed
> as the Japanese call money back home to help rebuilding
> efforts. Meanwhile, oil and other commodities faltered as the
> world’s third-biggest economy is set to pause or slow, limiting
> short-term demand. Re-insurers also dipped on fears of extensive
> claims.
> Sherry Cooper, chief economist of BMO Capital Markets, notes the
> BoJ has pledged liquidity to cope with the disaster aftermath and
> central banks all over the world will be on red alert to cope with
> any dislocations.
> Economic activity cannot help but be negatively impacted
> worldwide, which will put downward pressure on interest rates. The
> flight to the safe haven of U.S. Treasuries will assure lower
> yields and cheaper borrowing rates and a stronger U.S. Dollar, she
> said.
> But Carl Weinberg, chief economist at High Frequency Economics,
> says the Japanese themselves could well be scrambling for cash in
> the next days and weeks.
> “Millions of people are going to need a lot of cash, and bank
> branches are not going to be open in a lot of places,” he said in
> a note this morning. “A lot of households and small businesses
> that conduct financial transactions electronically are not going
> to be able to conduct those transactions because their houses or
> businesses are gone. That will impact the people and businesses to
> whom money is owed, regardless of where that may be… in Japan or
> in New York City.”
> Meanwhile, as traders are as unprepared as the rest of us to deal
> with unforseen events, Mr. Gartman may have been on to something
> when he warned two weeks ago of the impending approach of the moon
> to the earth. The so-called “supermoon” will come as close as it
> has to earth in a long time on March 19.
> The gravitational effect of the moon upon earth and the potential
> result of more earthquakes elevated fears after the recent
> earthquake in Christchurch, New Zealand.
> “We shall warn again of that likelihood,” Mr. Gartman said in his
> daily letter.
>
http://business.financialpost.com/2011/ ... liquidity/