impromptuz

(this entry is going to be very long….becoz I have no pset due tomorrow..hahaha)

(1) Nuclear Crisis

The nuclear crisis is a wake-up call for everyone–another high-risk, high-return investment.
but this time it’s not merely monetary risk, it’s real health risks to ppl nearby

ended up my Japan summer research was not entirely irrelevant to the nuclear crisis. What I studied and simulated is boiler tube deformation, or ultimately failure, under extreme high temperature and pressure in power plant. It is somewhat loosely applicable to the nuclear reactor meltdown in the Japan nuclear plant.

Earlier today I attended a technical briefing by the M1T Dept of Nuclear Science and Engineering, an absolute full-house packed with professors, students, Japanese community in Boston and even our MIT President. Given the short timeframe and the amount of concrete information available, it is understandable, but a bit disappointing, that the panelists weren’t able to answer many questions raised from the floor. Nevertheless, it is a clear summary of what have happened to the Fukushima Dainichi plant so far since Friday.

Long story short, after automatic shutdown of the reactor, decay heat has to be cooled down by coolant circulation. However the tsunami has disabled the pumping connection and the backup generator, so the cooling system failed. They are trying to inject seawater, but the water replacement rate is not quick enough to offset the boiling rate, then the fuel rod is uncovered. due to overheat and pressure, the containment vessel might breach, and release volatile radioactive materials.

Some other points that I haven’t heard before are: long-term implication of saltwater injection might have corrosive effect within weeks. Given its vulnerability to extreme tsunami,  a 2-meter tsunami barrier is not enough. the coastal nuclear plant itself or the backup generator/battery should be built at an elevated level in the future.

I think the department blog and this interactive feature of NYT explained pretty well. Thanks LCH for the latter link.

(2) Why does Yen appreciate after earthquake?
While I am cashing in on the earthquake through my yen savings,  I didn’t really bother to think why yen would strengthen recently…thanks blau for asking haha. Though this spike may probably be short-lived, it’s interesting to learn more about what’s going on in the FX world.

People normally would expect a weakened currency after disasters, e.g. NZ/Aus dollars dropped significantly after the Christchurch earthquake..coz everything is damaged and ppl won’t really expect the economy to recover fully in a short time. For yen, it is somehow appreciating in the past few days, what makes this Japan earthquake (or Japan in general, as Kobe earthquake in 1995 also triggered a +20% spike) different then?

At the end of the day it’s always about investors’ expectations. Domestic investors are buying back yen for different reasons for now, this substantial yen-cash inflow pushes the value of yen up. Some 自圓其說 reasons are:

• Inflow of yen-capital for immediate domestic funding needs: companies might cash yen for reconstructions, insurance claims and possibly massive donations. To do this, they gotta repatriate their foreign savings and investments, i.e. a halt in cash outflow at the moment.
• To limit equity loss: individual investors might sell their stocks (-16% in 2 days) and increase their cash holdings.
• Hope: Some investors might expect a long-term increase in economic activity in an effort to rebuild the nation
• Safe haven: safe yen is still highly demanded against other major currencies at global uncertainties. (though I dont really buy this)
• Speculation

For why this appreciation could be a “knee-jerk” response, read here.