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Possible Early Warning Sign for Market Crashes
Understanding Japan’s Nuclear Crisis
Spacecraft Swings Into First Orbit Around Mercury

Possible Early Warning Sign for Market Crashes

Posted: 18 Mar 2011 10:11 AM PDT

Complexity researchers who study the behavior of stock markets may have identified a signal that precedes crashes.

They say the telltale sign is a measure of co-movement, or the likelihood of stocks to move in the same direction. When a market is healthy, co-movement is low. But in the months and years before a crash, co-movement seems to grow.

Regardless of whether stock prices go up or down or stay the same, they do so in tandem. People are copying each other, and a small nudge can send everyone in the same direction. The system appears primed for collapse.

"One of the most important things happening now is that economists are trying to understand, what is systemic risk? When is the entire system vulnerable to disaster? Our results show that we have a direct, unambiguous measure of that vulnerability," said Yaneer Bar-Yam, president of the New England Complex Systems Institute.

Seen through an econophysicist's eyes, a stock market panic is an avalanche.

Bar-Yam's findings, released Feb. 13 on arXiv, are part of an emerging research field known as econophysics. It applies to economics insights from the physical world, especially from systems in which networks of interacting units produce radical collective behaviors.

Heated water turning to gas is one such behavior, known technically as a phase transition. Another is snow gathering into an avalanche. Seen through an econophysicist's eyes, a stock market panic is an avalanche, too.

Using a phase-transition model, Bar-Yam's group analyzed patterns of movement in the stock market. At the beginning of the 2000s, co-movement was low. On any given day, about half the stocks were moving up or down. By 2008, shortly before the crash, co-movement was absolute. People were no longer making independent decisions, but copying others.

"There's a break point where the system is flat — equally likely to have any number of stocks moving together on a particular day," said Bar-Yam. "And if you see these collective behaviors building up, then you know you're in trouble."

At top, a metric of stock co-movement during the 2000s. As it gets closer to zero, individual stocks are more likely to move up or down in the same direction. At bottom is the Russell 3000 Index.

After expanding the analysis back to 1985, they found periods of increasing co-movement within four years before each major crash, though never so starkly as before 2008. The researchers also propose that increasing co-movement fuels large, single-day market drops.

Jeffrey Fuhrer, researcher director at the Federal Reserve Bank of Boston, called the results intriguing but preliminary, requiring more rigorous statistical examination.

"As an initial pass, it's an interesting idea," he said, but doesn't yet distinguish when investors respond rationally and independently to the same information, such as a rise in fuel prices, or move reflexively as a herd.

However, the line between those trends may be blurry. According to Bar-Yam's group, external stresses — fuel prices, war, the perception of market bubbles — may increase the market sensitivity, making it more vulnerable to panic. So might changes in the very structure of markets, from their increasingly interlocking nature to instant-communication tools.

Fuhrer's cautions were echoed by econophysicist Tobias Preis of the Swiss Federal Institute of Technology. "One should be very careful about generalization to predict future crises," he said. "The most important point is to quantify this risk. That would be a huge step forward."

If co-movement does prove to be a reliable early warning signal, it's an open question how to make use of it. "That is one of the $64,000 questions," said Fuhrer.

Whereas bailing out a company is relatively simple, intervening in the dynamics of a system is not. But the first step is understanding that markets follow rules we're just beginning to understand.

"The financial crisis has shown that mainstream economic theories have limitations that need to be overcome," said Dirk Helbing of the Swiss Federal Institute of Technology, who specializes in modeling crowd behavior. "Economic systems have become much more complex, and complex systems have certain features — cascading effects, systemic shifts. This calls for new theoretical approaches."

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Citation: "Predicting economic market crises using measures of collective." By Dion Harmon, Marcus A. M. de Aguiar, David D. Chinellato, Dan Braha, Irving R. Epstein, Yaneer Bar-Yam. arXiv, Feb. 13, 2011.

Understanding Japan’s Nuclear Crisis

Posted: 18 Mar 2011 09:00 AM PDT

By John Timmer, Ars Technica

Following the events at the Fukushima Daiichi nuclear reactors in Japan has been challenging. At best, even those present at the site have a limited view of what's going on inside the reactors themselves, and the situation has changed rapidly over the last several days. Meanwhile, the terminology involved is somewhat confusing—some fuel rods have almost certainly melted, but we have not seen a meltdown; radioactive material has been released from the reactors, but the radioactive fuel currently remains contained.

Over time, the situation has become a bit less confused, as cooler heads have explained more about the reactor and the events that have occurred within it. What we'll attempt to do here is aggregate the most reliable information we can find, using material provided by multiple credible sources. We've attempted to confirm some of this information with groups like the Nuclear Regulatory Commission and the Department of Energy but, so far, these organizations are not making their staff available to talk to the press.

Inside a Nuclear Reactor

Nuclear reactors are powered by the fission of a radioactive element, typically uranium. There are a number of products of this reaction, but the one that produces the power is heat, which the fission process gives off in abundance. There are different ways to extract electricity from that heat, but the most common way of doing so shares some features with the first steam engines: use it to boil water, and use the resulting pressure to drive a generator.

Radioactivity makes things both simpler and more complex. On the simpler side, fission will readily occur underwater, so it's easy to transfer the heat to water simply by dunking the nuclear fuel directly into it.

In the reactor design used in Japan, the fuel is immersed in water, which boils off to generate power, is cooled, and then returns to the reactor. The pressure vessel and primary containment keep radioactivity inside. (Ars Technica)

Unfortunately, the radioactivity complicates things. Even though the fuel is sealed into rods, it's inevitable that this water will pick up some radioactive isotopes. As a result, you can't just do whatever you'd like with the liquid that's been exposed to the fuel rods. Instead, the rods and water remain sealed in a high-pressure container and linked pipes, with the hot water or steam circulated out to drive machinery, but then reinjected back into the core after it has cooled, keeping a closed cycle.

The water recirculation doesn't just let us get power out of the reactor; it's essential to keeping the reactor core cool. Unless the heat of decay is carried away from the core, its temperature will rise rapidly, and the fuel and its structural support will melt.

The Fission Reaction

Uranium ore. (Marchin Wichary/Flickr)

On its own, the uranium isotope used in nuclear reactors will decay slowly, releasing a minimal amount of heat. However, one of the decay products is a neutron, which can strike another atom and induce that to split; other neutrons are produced as the products of that split decay themselves. At high enough densities, this chain reaction of neutron-induced fission can produce a nuclear explosion. In a nuclear reactor, the fuel density is low enough that this isn't a threat, and the rate of the fission can be controlled by inserting or removing rods of a material that absorbs neutrons, typically boron.

Completely inserting control rods to limit uranium's fission, however, doesn't affect what's happened to the products of previous reactions. Many of the elements that are produced following uranium's split are themselves radioactive, and will decay without needing any encouragement from a neutron. Some of the neutrons from the reactor will also be absorbed by atoms in the equipment or cooling water, converting those to radioactive isotopes. Most of this additional radioactive material decays within the span of a few days, so it's not a long-term issue. But it ensures that, even after a reactor is shut down by control rods, there's enough radioactive decay around to keep things hot for a while.

All of which makes the continued operation of the plant's cooling system essential. Unfortunately, cooling system failures have struck several of the reactors at Fukushima Daiichi.

Surviving the Quake, But Not the Tsunami

Because cooling is so essential to a plant's operation, there are a few layers of backups to keep the pumps running. For starters, even if the reactors themselves are taken offline, the coolant pumps can receive power from offsite; this option was eliminated by the earthquake itself, which apparently cut off the external power to Fukushima. The earthquake also triggered a shutdown of the reactors, removing the obvious local source of power to the pumps. At this point, the first backup system kicked in: a set of on-site generators that burn fossil fuels to keep the equipment running.

Those generators lasted only a short while before the tsunami arrived and swamped them, flooding parts of the plant's electrical system in the process. Batteries are in place to allow a short-term backup for these generators; it's not clear whether these failed due to the problems with the electrical system, or were simply drained. In any case, additional generators were slow to arrive due to the widespread destruction, and didn't manage to get the pumps running again when they did.

As a result, the plants have been operating without a cooling system since shortly after the earthquake. Even though the primary uranium reaction was shut down promptly, the reactor cores have continued to heat up due to secondary decay products.

Ugly Possibilities

Without cooling, there are a number of distinctly ugly possibilities. As water continues to be heated, more steam will be generated within the reactor vessel, increasing the pressure there, possibly to the point where the vessel would fail. The reactor vessel would burst into a primary containment vessel, which would limit the immediate spread of radioactive materials. However, the rupture of the reactor vessel would completely eliminate any possibility of restoring the coolant system, and might ultimately leave the reactor core exposed to the air.

And that would be a problem, since air doesn't carry heat away nearly as efficiently as water, making it more likely that the temperatures would rise sufficiently to start melting the fuel rods. The other problem with exposing the fuel rods to air is that the primary covering of the rods, zirconium, can react with steam, reducing the integrity of the rods and generating hydrogen.

To respond to this threat, the plant's operators took two actions, done on different days with the different reactors. To begin with, they attempted to pump cold sea water directly into the reactors to replace the boiled-off coolant water. This was not a decision made lightly; sea water is very corrosive and will undoubtedly damage the metal parts of the reactor, and its complex mixture of contents will also complicate the cleanup. This action committed the plant operators to never running it again without a complete replacement of its hardware. As an added precaution, the seawater was spiked with a boron compound in order increase the absorption of neutrons within the reactor.

The second action involved the bleeding off of some pressure from the reactor vessel in order to lower the risk of a catastrophic failure. This was also an unappealing option, given that the steam would necessarily contain some radioactivity. Still, it was considered a better option than allowing the container to burst.

This decision to bleed off pressure ultimately led to the first indications of radioactivity having escaped the reactor core and its containment structure. Unfortunately, it also blew the roof off the reactor building.

Hard Choices to Bad Results

As seen in some rather dramatic video footage, shortly after the pressure was released, the buildings housing the reactors began to explode. The culprit: hydrogen, created by the reaction of the fuel casing with steam. The initial explosions occurred without damaging the reactor containment vessel, meaning that more significantly radioactive materials, like the fuel, remained in place. Larger increases in radioactivity, however, followed one of the explosions, indicating possible damage to the containment vessel, although levels have since fluctuated.

However, the mere presence of so much hydrogen indicated a potentially serious issue: it should only form if the fuel rods have been exposed to the air, which indicates that coolant levels within the reactor have dropped significantly. This also means that the structural integrity of the fuel rods is very questionable; they've probably partially melted.

Part of the confusion in the coverage of these events has been generated by the use of the term "meltdown." In a worst-case scenario, the entire fuel rod melts, allowing it to collect on the reactor floor, away from the moderating affect of any control rods. Its temperature would soar, raising the prospect that the material will become so hot that it will melt through the reactor floor, or reach a source of water and produce an explosive release of steam laced with radioactive fuel. There is no indication that any of this is happening in Japan at the moment.

Still, the partial melting of some fuel does increase the chances that some highly radioactive material will be released. We're nowhere near the worst case, but we're not anywhere good, either.

An additional threat has recently become apparent, as one of the inactive reactors at the site suffered from an explosion and fire in the area where its fuel is being stored. There is almost no information available about how the tsunami affected the stored fuel. Hydrogen is again suspected to be the source of the explosion, which again suggests that some of the fuel rods have been exposed to the air and could be melting. It's possible that problems with the stored fuel contributed to the recent radiation releases, since there isn't nearly as much containment hardware between the storage area and the environment.

Again, plans have been made to add sea water to the storage area, both by helicopter drops attempted earlier today, and through standard firefighting equipment.

Where We Stand

So far, the most long-lived radioactive materials at the site appear to remain contained within the reactor buildings. Radioisotopes have and continue to escape containment, but there's no indication yet that these are anything beyond secondary decay products with short half-lives.

Although radiation above background levels has been detected far from the reactor site, most of this has been low-level and produced by short-lived isotopes. Prevailing winds have also sent a lot of the radioactive material out over the Pacific. As a result, most of the problems with radioactive exposure have been in the immediate vicinity of the Fukushima Daiichi reactors themselves, where radiation has sometimes reached threatening levels; it's been possible to hit a yearly safe exposure limit within a matter of hours at times. Areas around the reactors have been evacuated or subject to restrictions, but it's not clear how far out the areas of significant exposure extend, and they may change rapidly.

All of this is severely complicating efforts to get the temperatures under control. Personnel simply can't spend much time at the reactor site without getting exposed to dangerous levels of radioactivity. As a result, all of the efforts to get fresh coolant into place have been limited and subject to interruption whenever radiation levels spike. The technicians who continue to work at the site are putting their future health at risk.

There is some good news here, as each day without a critical failure allows more of the secondary radioactive materials to decay, lowering the overall risk of a catastrophic event. In the meantime, however, there's little we can do to influence the probability of a major release of radioactive material. Getting seawater into the reactors has proven to be hit-or-miss, and we don't have a strong sense of the structural integrity of a lot of the containment buildings at this point; what's happening in the fuel storage areas is even less certain. In short, our only real option is to try to get more water in and hope for the best.

Future of Nuclear Energy

Nuclear power plays a big role in most plans to limit the use of fossil fuels, and the Department of Energy has been working to encourage the building of the first plants in decades within the US. The protracted events in Japan will undoubtedly play a prominent role in the public debate; in fact, they may single-handedly ignite discussion on a topic that the public was largely ignoring. The take-home message, however, is a bit tough to discern at this point.

In some ways, the Japanese plants, even though they are an old design, performed admirably. They withstood the fifth-largest earthquake ever recorded, and the safety systems, including the automatic shutdown and backup power supplies, went into action without a problem. The containment systems have largely survived several hydrogen explosions and, so far, the only radioactive materials that have been released are short-lived isotopes that are concentrated in the plant's vicinity. If things end where they are now, the plants themselves will have done very well under the circumstances.

But, as mentioned above, ending where we are now is completely beyond our control, and that highlights some reasons why this can't be considered a triumph. Some of the issues are in the design. Although the plant was ready for an extreme event, it clearly wasn't designed with a tsunami in mind—it is simply impossible to plan for every eventuality. However, this seems to be a major omission given the plant's location. It also appears that the fuel storage areas weren't nearly as robustly designed as the reactors.

Once the cooling crisis started, a set of predictable issues cropped up. We can never send humans inside many of the reactor areas, leaving us dependent upon monitoring equipment that may not be working or reliable during a crisis. And, once radiation starts to leak, we can't send people to many areas that were once safe, meaning we've got even less of an idea of what's going on inside, and fewer points to intervene at. Hardware that wasn't designed for some purposes, like pumping sea water into the reactor vessel, hasn't worked especially well for the emergency measures.

On balance, the safety systems of this reactor performed reasonably well, but were pushed up against a mixture of unexpected events and design limits. And, once anything starts to go wrong with a nuclear reactor, it places the entire infrastructure under stress, and intervening becomes a very, very difficult thing to do.

This latter set of issues mean that the surest way to build a safe nuclear plant is to ensure that nothing goes wrong in the first place. There are ways to reduce the risk by adding more safety and monitoring features while tailoring the design to some of the most extreme local events. But these will add to the cost of a nuclear plant, and won't ever be able to ensure that nothing goes wrong. So, deciding on if and how to pursue expanded nuclear power will require a careful risk analysis, something the public is generally ill-equipped for.

Top image: Ars Technica.

Source: Ars Technica.

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Spacecraft Swings Into First Orbit Around Mercury

Posted: 18 Mar 2011 08:14 AM PDT

NASA's Messenger spacecraft swung into position around Mercury Thursday night, making it the first spacecraft ever to orbit the innermost planet.

Engineers at the Johns Hopkins University Applied Physics Laboratory in Maryland, 96 million miles from Mercury, received the signal confirming that Messenger (MErcury Surface, Space ENvironment, GEochemistry and Ranging) had completed its final maneuver at 9:10 pm EDT.

To slow down enough to get caught in Mercury's gravitational field, Messenger fired its main thruster for 15 minutes. The burn slowed the spacecraft by 1,929 mph and used up 31 percent of its original fuel supply.

After finishing the burn, Messenger rotated to face the Earth by 9:45 p.m., and started transmitting data. Engineering and operations teams confirmed the maneuver went according to plan.

The event marks the end of a 6½-year journey for Messenger, which has made 12 laps around the solar system, two flybys past Earth, one past Venus and three past Mercury since launching in August 2004.

Although engineers still need to do some analysis to figure out the spacecraft's exact orbit, they expect Messenger to swoop around Mercury in a highly elliptical orbit once every 12 hours. It will dip within 120 miles of Mercury's surface at its closest point, and go out to 9,320 miles at its farthest.

The orbit goes nearly pole-to-pole, offset by about 7 degrees. That slight tilt is to help get a handle on the planet's gravitational field, said principal investigator Sean Solomon, a planetary scientist at the Carnegie Institution of Washington, in a press conference March 15.

Measurements of the gravitational field "will tell us something about Mercury's composition, the size of the core and the structure of that core," he said.

One of the mission's main objectives is to figure out why Mercury's core is so big compared to the cores of the other rocky planets. Another is to make high-resolution maps of the whole planet, some of which has still never been seen.

"Many on the science team have been involved from the very beginning," Solomon said. "We are extremely excited to begin that mapping."

Scientists also plan to search for water ice in craters at the poles which, despite Mercury's proximity to the sun and scorching daytime temperatures, are stuck in eternal freezing shadow.

The spacecraft's seven science instruments were turned off for orbit insertion, but they will reactivate March 23. The first orbital image, planned for March 29, will include some uncharted regions near Mercury's south pole.

The science phase of the mission will begin April 4. The Messenger team will release data to the science community at six-month intervals, but will release images at least once a day throughout the mission, Solomon said.

"In addition to the global imaging we'll be doing, we've targeted more than 2,000 areas for ultra-high-res with our narrow-angle camera. Many of them were not discovered until flybys," he said. "We've got a long list."

Images: 1) Artist's conception of Messenger approaching Mercury. 2) The target area for Messenger's first image from orbit, including never-before-seen terrain. (NASA/Johns Hopkins University Applied Physics Laboratory/Carnegie Institution of Washington)

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