Good morning

The headlines:

  1. Monitoring Nuclear Reactors.

    Link: in New Jersey.

    The Oyster Creek nuclear power point in New Jersey declared an alert last night as rising water levels went 6 feet above sea level.

    In addition, this video shows what happens to power plants (and/or their transformers) in New York during a super-storm:

    The markets are to remain closed for a second day. So the share prices of Exelon Corp. (the nuclear station owner) and Consolidated Edison Inc. (the owner of the power plant) have remained static.

    But we should not worry, according to S&P Chief Equity Analyst, Sam Stoval, because “History says that hurricanes typically don’t trigger market declines. Equities are more likely driven by wider-reaching global events than localised natural disasters.”

    That may be true. But then again – most hurricanes don’t affect 14 US states at once. From what I’ve seen on CNN (when they’re not awkwardly backtracking on a false report that the NYSE is under 3 feet of water), the reason that everyone is worried about Sandy is her breadth…

  2. The Apple shake-up.

    Link: the management overhaul.

    Tim Cook is getting rid of Scott Forstall (responsible for Siri and Maps), as well as John Browett (in charge of the iStores).

    Scott is apparently quite difficult to work with. And given that he spearheaded Siri and Maps, both of which have turned out to be significantly less than as-hyped, it was apparently time for him to move on. Especially after he (allegedly) refused to sign the apology letter that Apple distributed for its Maps fail.

    As for Browett, who has been around for six months, I like this quote by analyst Sam Wolf:

    This guy was a diametric opposite of what the Apple stores are trying to do. The question is not that he was dismissed, but why he was hired.

    Browett adopted a strategy of reducing staff, reducing operating hours and limiting the transfer of stock between stores: clearly, he’s a cost-cutting man. Apple eventually reversed those decisions, calling them a “mistake”.

  3. Talking about Greece.

    Link: the euro-finance ministers are still searching for a solution.

    The Euro Ministers have more meetings lined up to address the Greece issue. And no envy there: because Greece is a rock/hard-place if ever I saw it.

    The current thought process on Greece’s debt is that it can be addressed in one of two ways: either Greece must spend less to pay back more (austerity), or Greece must grow its economy to the point where its debt burden is reduced (growth). Here is the awkward ratio:

    Debt Ratio = Debt/GDP

    Austerity allows Debt to be reduced, but it also lowers Gross Domestic Product through contraction – so the country can actually end up in a worse scenario than before.

    Economic growth requires financing, which at this point must come through borrowing. So you increase Debt while you increase GDP – so the country can also actually end up in a worse situation than before.

    That is an economic cul de sac without a reverse gear. And it makes for some very tight balancing of equations to try and not make it worse.

    And all these meetings – I’m not sure that they can make a difference without an alternative suggestion being laid on the table. And “Greece should leave the Euro” is not a viable solution: it would increase the debt (as the debt would remain denominated in Euro) and decrease GDP (as everyone involves themselves in bank runs and capital flight). Therefore: worse than either of the above.

    I really think that Debt Forgiveness is the only real option. And maybe this is actually the goal: as Greece needs to undertake the structural reforms that will allow the clean slate to be a feasible one.

    So the debt is a whip until those reforms are in place, and then it’ll be forgiven?

That’s all for now.

Have a good day.