Fisher Investments Editorial Staff

Nuclear No Go?

By, 03/25/2011
  • As of Thursday’s close, markets are now at or slightly higher than their pre-Japanese disaster levels.
  • Despite media consternation, actual nuclear fallout from the damaged Fukushima Daiichi reactors in Japan has been minimal.
  • Politicians globally are split on their future nuclear plans. Some have called for complete moratoriums on nuclear energy, while others are moving forward with nuclear plans.

It may not seem this way, but as of Thursday, US and global stocks have shrugged off the short-term declines occurring immediately in the aftermath of Japan’s earthquake and tsunami. But it’s not all that puzzling when considering the facts and fiction of Japan’s disaster.

While the media fretted a new Chernobyl or worse, actual nuclear fallout from the damaged Fukushima Daiichi reactors has been minimal. Similarly, reports of contaminated food and water are likley overstated—and global markets haven’t budged much on the news. Radiation has been reported on the US West Coast, but according to an Environmental Protection Agency (EPA) press release (and the EPA has no incentive to be dismissive), “levels are hundreds of thousands to millions of times below levels of concern.” Consider this: Each day you receive doses of radiation from rocks, bricks, and the sun. If you take an international flight, you will experience radiation at levels 100,000 times higher than what is currently detected from Japan to America’s West Coast.

But in political circles, the line between fact and fiction often doesn’t matter much. Therefore, politicians globally are having rather mixed reactions over the safety and regulation of nuclear power. The Obama administration reaffirmed support for continued nuclear development, though some fellow Democrats have floated proposals for moratoriums on new construction. The Nuclear Regulatory Commission agreed with Obama, saying there’s no need for concern about US nuclear power growth. So it seems a potential US reactionary decision hasn’t played out—an entirely sensible position in our view, based on available information.

The eurozone is more polarized. Nuclear plant stress tests are expected this summer, though these are voluntary and non-binding, and each country will determine its own policy. Germany has retracted earlier plans to extend aging plants’ lifespans. Plants built pre-1980—7 of Germany’s 17 plants—will be idled pending a three-month safety review, with two possibly shuttered permanently. Which seems a rather harsh move at this juncture, but perhaps is closely tied to intense rhetoric during some hotly contested state elections.

But Germany seems the extreme reactor (pun intended) to the Fukushima situation. Russian President Dmitry Medvedev said they will continue helping Turkey develop its first nuclear plant, fulfilling the $20 billion contract signed in 2010. Italy will hold a national referendum to repeal its post-Chernobyl nuclear hiatus on June 15th, and, if passed, Italy plans to boost nuclear from 10% to 25% of electricity generation by 2030. Meanwhile, French Prime Minister Francois Fillon planned nuclear safety inspections while stating wholesale condemnation of nuclear would be “absurd.” (France gets over 75% of its electricity from nuclear power.)

Emerging Markets players have also had a mixed response. While China has suspended its massive nuclear power development pending a safety review, India and South Korea appear to be moving forward as planned. India aims to spend $175 billion on nuclear by 2030, and Korea to increase its nuclear production capacity by 60% by 2020.

A fact-based review of history shows natural disasters have had little impact on developed markets long term—but broad political change can impact an industry dramatically. Fortunately, extant backlash against nuclear seems limited and local, not sweeping and global. And given time, maybe even those proposing a knee-jerk reversal will realize the lack of a major nuclear incident following the fifth-largest earthquake ever recorded speaks to a heck of an engineering feat and how safe nuclear has truly become—no need for a harsh crackdown.

Out of disasters like Japan’s earthquake and tsunami, lessons are learned—and it is precisely these lessons that result in progress. To us, greater safety and even productivity seem likely to result from a scientific analysis of what went right and what didn’t—despite some near-term vote-posturing.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.


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