Gilbert Gottfried has been getting all kinds of grief -- including loss of a gig as the Aflac duck -- for tasteless jokes he made on Twitter about the tsunami horror in Japan. But what people are forgetting is that his job is to tell dumb jokes. Humour in even the worst circumstances, even bad humor, is a safety valve, a method of keeping our sanity when the world is going to hell. And make no mistake about it: There is a whiff of sulfur in the air.
On Tuesday (and again today) the stock market in the U.S. accepted reality and followed the Japanese markets in staging a prolonged selloff. Isn't globalization wonderful? The tsunami was the proximate cause, but there was also a pent-up angst, a kind of mini-nervous breakdown from too many international crises piled on top of one another. What concerns me is that we're in for a significant siege, one that may rival the collapse of the markets in 2008. I hope I'm wrong, just as I hoped I was wrong in this space a couple of weeks ago, when I suggested that unrest in the Middle East might cause a decline in the markets. Boy, was I wrong. Things are actually far worse than I, or anyone, could possibly have anticipated.
On top of the pre-existing background noise of a lingering recession (despite an upturn in homebuilder confidence disclosed yesterday), and the prospect of Moamhar Gadhafi crushing the opposition in a prolonged conflict in Libya, we now have a humanitarian and nuclear crisis in Japan that would have been the stuff of science fiction just five days ago. I disagree with Larry Kudlow, the CNBC commentator who said the other day that the human toll looks to be worse than the economic toll and "we're grateful for that." That was a lousy choice of words for which he has been predictably pilloried, but to me the sin is less insensitivity than making a prediction that was, at best, premature.
Here's why:
The world is flat. I loved Tom Friedman's celebration of globalization, but now we're seeing the flip side of globalization: a horror in a developed nation on the other side of the world is only slightly less of a horror here. While the economic impact is muted for traditional competitors with the Japanese like General Motors (GM-N31.850.411.30%), chip-makers like Intel (INTC-Q19.930.030.15%) and National Semiconductor (NSM-N13.92-0.05-0.36%) were slammed yesterday. So was Texas Instruments (TXN-N33.360.290.88%), which has a plant in Japan. So were insurers like Aflac, MetLife (MET-N44.021.042.42%), Hartford Financial (HIG-N25.490.301.19%) and Prudential Financial (PRU-N60.631.131.90%). Any company with facilities in Japan (nuke-builder General Electric (GE-N19.250.030.16%) comes to mind) stands a good chance of being hurt if the nuclear crisis isn't resolved soon.
Japanese, banks, insurance companies, the yen (etc.) are under pressure. The yen actually gained yesterday as investors sought a safe haven, but the Bank of Japan is pumping billions of yen into the economy. It's hard to see how that will be successful if clouds of steam waft southward toward Tokyo and the industrial heartland of the nation. There is now dark talk on the Internet that a bond-market meltdown may be in the making. There's also chatter of an impending Japanese banking crisis. As blogger and hedgie John Hempton pointed out on Monday: "There is probably more uninsured damage in the destruction of North East Japan than in any other event in history -- and uninsured damage falls sharply on banks."
Everything else is still going on. Remember Libya? It's enmeshed in a civil war that is actually getting a lot worse, even as the horrific news from Japan is dominating the headlines. Since the rebels are losing, it's possible that the loon in charge of the place may force U.S. and European intervention by committing mass murder. If he loses, Libya may descend into even more chaos. Libya is still a major oil producer, last I looked. Sure, crude-oil prices gained a bit yesterday, but for the worst of reasons -- because investors are terrified about the Japanese economy.
We just don't know. There's nothing the markets hate more than uncertainty. Everything I've outlined above is speculation, but that's all we have to go on, apart from all the bad news. If Japan can't solve its nuclear plant issues, all of the above may actually turn out to be optimistic and cheery compared to a nuclear-poisoned third-largest economy.
Of course, I don't want to overstate the latter point. There are plenty of things we do know. We know that the Israel-Palestinian peace process is in the toilet, thanks to many things but including the massacre of a Jewish family in the West Bank. We know that Iraq and Afghanistan are continuing to bleed. Did anyone happen to notice that 11 people were killed at a car bombing outside an Iraqi base on Monday?
And then there's the U.S. economy, which is doing poorly enough without the help of any of the aforementioned nuggets of misery. I hope that Gilbert Gottfried isn't discouraged, because I'd sure like to find something to laugh about in that.
Gary Weiss, a columnist for TheStreet.com, has covered Wall Street wrongdoing for almost a quarter century. His coverage of stock fraud at BusinessWeek won many awards, and included a cover story, “The Mob on Wall Street,” which exposed mob infiltration of brokerages. He uncovered the Salomon Brothers bond-trading scandal, and wrote extensively on the dangers posed by hedge funds, Internet fraud and out-of-control leverage.
