Natural disasters return. During the recent interim reporting season the likes of IAG (NRMA) and Suncorp Metway (Promina), both pointed out that they had escaped the cost of a natural disaster in the back half of 2009. That was after the terrible Black Saturday bushfires around Melbourne 13 months ago. Now insurers have two to contend with; Melbourne’s hail storm, an expense that looks like being the largest and the floods in south-western Queensland. Early estimates put the cost in the hundreds of millions of dollars, but one thing to remember with insurance disasters is that the first estimate is always the lowest: they escalate quickly in the early days, as we will see this week in Melbourne as more people claim and assessors move into the field to cost the claims. Besides Suncorp and IAG, another insurer in the gun in Melbourne is the RACV and its joint venture with NRMA/IAG.

A natural disaster reminder: A couple of weeks ago I listed the pecking order for Australia’s most recent natural disasters: According to John Trowbridge, a director of our financial regulator APRA, the order went something like this in the past decade. “There had been few major weather events during the first half of the decade. The Canberra bushfires in 2003 were perhaps the worst in that period, at some $350 million, but several larger events occurred in 2006, 07, 08 and 09. They included Cyclone Larry in March 2006 ($540 million), the Hunter Valley storms in June 2007 ($1,450 million), storms in Sydney, Brisbane and Mackay in 2007 and 2008 (around $400 million each) and the Victorian bushfires just over one year ago in February 2009 ($1,070 million).”  The cost of the Sydney hail storm of 1999 is put at $1.9 billion (which Saturday’s storm in Melbourne is being compared to) and is the largest in reported dollars. But in unadjusted dollars the biggies are the Newcastle earthquake of 1989 and Darwin’s Cyclone Tracy in 1974.

Bigger than 2008: Twenty six US banks have failed so far this year, one more than in all of 2008, nearly nine times more than 2007 and a long way short of last year’s 146. Regulators shut banks in Maryland, Illinois, Florida and Utah. That was after two went under the week before. Buyers could not be found for two banks, which were shut and will be run down in the next month. The key regulator, the Federal Deposit Insurance Corporation, last month said 702 banks were on its problem list at December 31, up 27% from the third quarter. In Washington state alone, there are 27 banks under regulators’ orders to get more capital and revamp their business plans by cutting costs. That’s usually a precursor to more drastic actions.

Decoding China 1: “China will further improve the formation mechanism of exchange rate of the renminbi, or the country’s currency yuan, to keep the exchange rate basically stable at an adaptive and balanced level,” the People’s Bank of China said Saturday at the National People’s Congress, the rubber stamp for official Chinese decisions. That was a statement from China’s central bank saying that nothing will be done about the value of the yuan. Not for the time being, but sometime later this year, after the first rate rise, perhaps, the currency will be allowed to drift upwards.

Decoding China 2: Earlier Premier Wen Jiabao went through the usual theatrics of setting the annual economic growth target of 8%, and inflation of 3% and a few other statements about housing, investment, lending and social policy. All hardly a shock. The issue of the currency’s value is the big test for China. The only way to make sure inflation can be controlled is to restrict bank lending (already happening), then the price of money, (not yet, but soon) and finally the value of the currency to help put downward pressure on costs, especially with price rises of 50% to 70% coming for iron ore and coal imports. For all its importance, the People’s Bank of China won’t be the one freeing up the currency, that will come from the Politburo and the State Council. China can very easily allow the currency to float higher by reversing the mechanism it put in place in July 2008 to fix it as exports shrunk and the economy slowed.

Joy to the world, again? Markets went hip, hip, hooray for the US February jobs figures, and snow storm or no snow storm, they look encouraging. Just 36,000 jobs were lost and the storms did make it hard to work out what was what in the east. The unemployment rate was steady at 9.7% and there’s a definite plateau appearing in graphs of jobless. But 8.4 million people have still lost work in the recession since December 2007. But there’s along way to go, the US needs 125,000 new jobs every month just to keep pace with the growth of the American workforce.

Jobs toll is terrible: Nearly 15 million Americans remain unemployed, about 2.3 million of them in California. About 40% of those workers have been jobless for six months or longer. While there was more growth in part-time work, a precursor to a rise in full-time employment, jobs are still being lost in vulnerable sectors: construction employment fell by 64,000 in February, about in line with the average monthly job loss over the prior six months. Since December 2007, employment in construction has fallen by 1.9 million. Employment in the information industry dropped by 18,000 in February. Since December 2007, job losses in information have totaled 297,000. The American media and IT sector has been a much more brutal place to work than in Australia, construction is in a depression of its own.

Japanese GDP revision coming: Again the Japanese Government has overestimated investment spending by business in the first estimate for fourth quarter economic growth that was projected at an annual rate of 4.6%. The third-quarter growth estimate collapsed by more than 4% annual to zero once a 25% plus fall in business investment was confirmed. After an 18% fall for the fourth quarter was revealed last week, Japanese economists are now cutting their GDP estimates back below 4%, or less than 1% quarter on quarter. The second fourth quarter GDP estimate is out on March 11. It was the 11th successive quarter where investment had fallen. Japanese business also reported another fall in sales in the quarter, but a doubling in profits.

Lenny ruined Canwest: He is still scheming to get back the company he and his mates drove into debt riddled bankruptcy. “He’ is Leonard Asper, who last week quit as CEO of Canwest Global Communications and is now working with his partner in the failure, Goldman Sachs, and another group, to get a counter bid ready to beat the one on the table from Canadian cable group, Shaw. Lenny bailed out of Canwest midway through last week and by the weekend, Canadian business was full of stories how he was plotting with Goldman and Catalyst to try and top the Shaw offer. Lenny said in his statement that he was going to “pursue other opportunities”.

Now he wants it back: “Grabbing back control of Canwest isn’t an opportunity, it’s an act of entitlement.” Lenny said he wanted to avoid any potential conflicts of interest, but would remain a consultant to Canwest until it emerges from bankruptcy. How remaining a consultant and then plotting a counter offer doesn’t raise a conflict of interest is beyond me. Dad Issy started Canwest and built it and Lenny and his mates loaded it up with debt, much of it from Goldman Sachs, and when the recession and GFC hit, the company had nothing to fall back on. It was forced to sell its best asset in the Ten Network in Australia. Auction bids for Canwest’s newspaper interests closed on Friday night in Canada.