Per CNN: Radiation level rising in Fukushima No. 1 nuclear plant turbine building, Kyodo News Agency reports.
That's not good.
Who'd a thunk that BTFD works for commodities even better than it does for stocks. Desks now advising clients that QE3 is likely (whether or not due to this article is irrelevant) and the result is presented below.
This is why people tend to pay a premium for "Made in Japan"...
It's Official: Wisconsin Gov. Walker Signs Bill Taking Away Public Worker Collective Bargaining Rights.Submitted by Tyler Durden on 03/11/2011 - 11:59
While the signature of Governor Walker to the Bill that had passed both the Senate and the Assembly, was inevitable, it is now also history. The first shot across the bow at America's unions is now official. What happens in Wisconsin next is anyone's guess. Probably nothing much. And any union member who may consider protesting today should carefully evaluate whether they should be doing so at the Senate building or on Wall Street/D.C. where the root of America's insolvency, and all of its financial problems stems from.
$440 Billion Drop In Shadow And Conventional Banking System Liabilities In Q4 Gives Bernanke Carte Blanche For QE3Submitted by Tyler Durden on 03/11/2011 - 10:59
When we last updated on the size of the shadow banking system, the financial "system" that is far more important to the economic prosperity of the US economy than the traditional liabilities held by conventional banks, we observed that after declining for 9 consecutive quarters, having hit a peak of $21 trillion in 2008, the shadow banking system had reached an inflection point and had posted a very modest increase at around $16 trillion in total liabilities in the third quarter of 2010. Well, following yesterday's Z.1 release, it seems the bulk of the data was revised, and it appears that not only was last quarter's upward pre-revision data a fluke, when in reality it was another decline of $191.7 billion, but the Q4 data further reinforced the negative trend, with shadow liabilities declining by an even greater $206.4 billion. The components responsible for the decline were ABS Issuers whose liabilities declined by $94 billion, securities loaned by funding corporations declining by $40 billion and lastly repos, which dropped by $79 billion. In other words, speculation that the Fed had achieved its goal of stimulating an organic reflation in the shadow banking system at which point it would be able to end QE and hand off releveraging over to the private sector were premature, and recent data confirms that the Fed has no choice now but to continue with its quantitative easing process, as it does more of the same: take capital from the public sector and proffer it to Primary Dealers in an attempt at ongoing asset reflation, which will, the theory goes, be matched by a comparable hike in liabilities. Botton line - Bernanke has once again failed to spark a "virtuous leveraging cycle" even with QE2, which after all is the fundamental goal of the Fed, far beyond even getting the Russell 2000 to 2000. Which means that the Fed will have no choice but to continue "printing" money, and monetizing bonds, as it (in conjunction with the Treasury of course) continues to be the only incremental source of leverage, and thus money, for the world's biggest economy.
Two months ago many were scratching their heads when Japan announced it was buying Eurozone bonds. After all - why would Europe want to have a marginal buyer (or as the case may be seller) of its debt be the country that is known by all to be the most indebted entity in the world? Of course, it became promptly clear that it was not the Japanese government doing the buying, but mostly its financial companies, with an emphasis on its insurance and reinsurance companies. Fast forward to today when Japanese insurance companies are getting pummeled in local trading on concerns the payoffs to the decimated Japanese infrastructure will be unprecedented. So what will happen? Why a scramble for liquidity of course, just like we saw back in September 2008, when cash stricken companies sold all their liquid assets first, resulting in a toxic loop of self-fulfilling prophecy selling which almost tobbled the $25 trillion shadow banking system. And what will said Japanese insurance companies sell first? Why the very same Eurozone bonds they acquired with so much pomp and circumstance, by the minions of the insolvent Eurozone, back in January of course. Furthermore, now that Japan will have no choice but to launch a mini round of Quantitative Easing and flood the market with JGBs, there will be a dramatic spike in supply for sovereign paper, which of course means yields across the board will rise. Which begs the question: if an earthquake flips its wings in Japan, does the Eurozone go bankrupt, especially in the month when its most insolvent countries face billions in debt rollover requirements, tens of billions in maturity funding needs, even more in deficit funding requirements... and no cash?
The massive earthquake and tsunami that has rocked Japan is being digested by markets and the economic ramifications and uncertainty is leading to risk aversion. Tokyo gold futures rose on the news with the most active gold contract on the Tokyo Commodity Exchange, February 2012 inching 0.22% higher to 118,000 yen prior to giving up those gains. Gold is marginally lower in dollars but higher in euros, Swiss francs and British pounds. After the falls on Wall Street yesterday the Nikkei was already under pressure when news of the quake broke at the end of the trading day. The Nikkei fell 1.7% today and is down over 4.11% for the week. The Japanese yen was sold in the immediate aftermath of the quake. Counter-intuitively it then recovered and is the strongest currency in the world today (see table). Market participants appear to be seriously underestimating the risk posed by the megaquake to the Japanese economy and assets. Alternatively, there may have been intervention by the Japanese authorities in order to maintain confidence and protect the value of their currency and bonds. The Bank of Japan, like the Federal Reserve, regularly intervenes in foreign exchange markets and has even intervened in equity markets by buying ETFs linked to the Nikkei and the Topix. Considering the sharp selloff seen in equity markets in recent days, gold’s resilience is impressive. Gold is down nearly 1% for the week and a lower weekly close could see the short term momentum change and a period of correction and consolidation.
The market has been acting very weird all morning, with the oddness culminating in peripheral European bonds as of several minutes ago. Something odd is happening in the shorter end of Portuguese and Irish bonds, where a sudden move sent the curve to an unprecedented inverted levels as if by a fat finger across the board. Note the dramatic move in the 5 Year of both countries' bonds without any catalytic newsflow, which sent the Portuguese 5 Year to a lifetime high 7.93%. Have the stock HFT algos gone rogue and are now taking over the sovereign bond space?
An earthquake in Japan earlier today sent markets down this morning as today’s EU summit on a rescue mechanism lingers in the background. Treasuries rallied again yesterday as European sovereign news and slow Chinese export growth clogged headlines. The budget deficit expanded in February, pushing out to its largest point ever at $220.5B due to increased spending. The new record occurs in the background of a split Congress that has not yet been able to meet a compromise on this year’s budget and a CBO-projected $1.5T deficit in 2011. Today’s release of February’s retail sales will likely be strong given the spike in gas and food prices, with advance retail sales at 1.0%E v 0.3% prior. Excluding those inflationary boosts, retail sales should still be moderate given the lighter weather experienced in months prior. We expect some upside to expectations here, but note that any disappointment will certainly exacerbate the negative headlines this AM.
Domino #2. If a peaceful protest results in tear gas, one wonders what the napalm content of the response would be if anyone makes any false moves. "Kuwait riot police fired tear gas Friday to break up a small, peaceful demonstration by stateless Arabs who were demanding greater rights in the oil-rich Gulf nation. Besides Kuwait, protests were also expected Friday in Bahrain and Saudi Arabia, while tens of thousands of anti-government demonstrators also took to the streets of the poorest nation in the Arabian Peninsula, Yemen."
The Yen is surging on repatriation concerns as infrastructure spending is expected to pick up following the countrywide devastation. Below are pictures summarizing just how dramatically the earthquake and following tsunami have impacted Japan.
And while crude drops on a sudden plunge in oil demand following Japanese refinery shutdowns, supply issues may promptly be rearing their ugly head. Per preliminary Reuters reports at least 200 people protest in eastern Saudi Arabia. "More than 200 protesters took to the streets on Friday in the Saudi Arabian city of Hofuf, two activists told Reuters, responding to a call by online social networks for protests in favour of political reform. Hofuf, a major urban centre in Saudi Arabia's oil rich Eastern Province close to the Ghawar oil field, has seen scattered protests by minority Shi'ites in the last two weeks." This is just the first report of what will likely be a massive protest wave across the region following news that Yemen, Kuwait And Bahrain will all be joining in today's day of rage.