Asian demand is especially strong in the increasingly important China. The Chinese strong cultural affinity and love affair with gold (primarily due to a distrust of Chinese paper money) shows no signs of abating. Indeed, it may be accelerating as was seen in the recent figures from the Shanghai Gold Exchange and customs in China and now reports (including from CNTV – the national TV station of the People's Republic of China) of shortages of raw gold or unrefined gold. China, now the largest producer of gold in the world is seeing its gold mines struggle to cater for surging Chinese demand. The raw gold trade has been growing by up to 30% per annum and demand has leapt in recent months leading to a developing raw gold shortage in China. The industry in China expects only 27,000 tonnes of raw gold can be delivered this year. That is way below the estimated demand of 50,000 tonnes. A potential supply shortage of 23,000 tonnes of gold is a large amount of gold in the small gold bullion market which is tiny versus equity, bond and derivative markets. It is infinitesimal when compared to the $4,000 billion a day traded in currency markets.
Markets worldwide are negative this morning on the news of a possible increase in European bank capital levels while U.S. futures are still in positive territory. The U.S. Treasury Dept. has announced that it will publically grade mortgage providers on response quality to homeowners that need payment reductions. Italian bank equities dropped on UBI Banca announcing a €1B capital increase in order to boost its core Tier 1 capital. As a result of the announcement, speculation that other banks would follow suit resulted in a selloff in the equity markets. Increases in commodity prices sent New Zealand’s February trade balance surging to +NZD194MM v -NZD3MM prior, making it the country’s first trade surplus in eight months. Japan’s Vice Finance Minister said yesterday that the government may have to abandon a planned five percentage point cut in corporate taxes to help pay for earthquake damage. PM Kan followed that up today signaling that multiple government spending plans may be needed to pay for disaster rebuilding.
- Fed’s Bullard Says QE2 Exit Debate Likely ‘Key’ 2011 Issue (Bloomberg)
- Obama Defends Libya Fight (WSJ)
- Radiation Found Outside Japan Reactor, Signaling Meltdown (Bloomberg)
- Radioactive Flood in Japan Reactor Tunnels (FT)
- SEC focusing on hedge funds that outperform “market indexes by 3% on a steady basis.” (Securities Docket)
- Schaeuble Sees Portugal Seeking Bailout, Handelsblatt Reports (Bloomberg)
- Budget negotiations breaking down (WaPo)
- Democrats, White House Said to Back $20 Billion of Additional Budget Cuts (Bloomberg)
- A Requiem for Detroit (WSJ)
Almost all Americans have heard Franklin Roosevelt’s speech to Congress on Dec. 8, 1941: “Yesterday, Dec. 7, 1941 — a date which will live in infamy — the United States of America was suddenly and deliberately attacked by naval and air forces of the Empire of Japan … I ask that the Congress declare that since the unprovoked and dastardly attack by Japan on Sunday, Dec. 7, a state of war has existed between the United States and the Japanese Empire.” It was a moment of majesty and sobriety, and with Congress’ affirmation, represented the unquestioned will of the republic. There was no going back, and there was no question that the burden would be borne. True, the Japanese had attacked the United States, making getting the declaration easier. But that’s what the founders intended: Going to war should be difficult; once at war, the commander in chief’s authority should be unquestionable.
With so much changing in Fukushima on a daily basis, it is easy to lose track of what is happening on any given day. In fact, some like Zero Hedge are now weary of reporting Fukushima news due to expectations of a full detraction within half an hour or so, after someone is discovered to have no idea what a decimal comma is, or another is simply lying, in ongoing efforts to spread confusion. Which is why the following Q&A from Reuters on the latest situation in the radioactive power plant is a useful recap for virtually everyone, even though most likely the party line, not to mention "fact" will change shortly.
In the second day full of Fed president speeches we hear from St. Louis hawk James Bullard who spoke in Prague on recent developments in monetary policy, and delivered remarks titled “U.S. Monetary Policy: Recent Developments” as part of a central bankers panel discussion at the 19th European Banking and Financial Forum in Prague. During his discussion, Bullard explained how the Fed’s second round of
quantitative easing was “a classic easing of monetary policy” and “an
effective tool, even while the policy rate is near zero.” He also
discussed the situation in early 2011, stating that “U.S. growth
prospects remain reasonably good for 2011.” He added that recent global
and domestic events “present considerable uncertainty, but can be
resolved in benign ways.” Finally, Bullard talked about the path to
normalization. “Discussion of the normalization of U.S. policy will
likely return as the key issue in 2011,” he concluded. Overall, the presentation had a not surprisingly hawkish tone. Don't forget it was precisely a year ago that the Fed was being extremely hawkish all over again, with reverse repos flying left and right, and everyone expecting that the economic "growth" was self sustainable, until it wasn't.
The decline in house prices may have slowed in January, but consumer confidence probably dropped in March. Daily POMO viagra today is in midget dose, with just $1.5 billion in monetization.
RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 29/03/11
It appears the plutonium discovered earlier, which according to some Japanese reports was so safe it was borderline edible, may not be all that safe. Per the IAEA: "Traces of plutonium are not uncommon in soil because they were deposited worldwide during the atmospheric nuclear testing era. However, the isotopic composition of the plutonium found at Fukushima Daiichi suggests the material came from the reactor site, according to TEPCO officials. Still, the quantity of plutonium found does not exceed background levels tracked by Japan's Ministry of Education, Culture, Sports, Science and Technology over the past 30 years."
If there is one thing the Japanese authorities are consistent in, it is their complete lack of consistency. First the government leaks information that it will nationalize TEPCO, sending the market panicking and the stock (9501.JP) triggering circuit breakers after it goes bidless, and a few hours later after seeing the devastation this is doing on the market (Nikkei down 1.5%), it backtracks and says it was only kidding. From Reuters: "Japan's government is not considering nationalising Tokyo Electric Power Co , the operator of the stricken nuclear plant, Chief Cabinet Secretary Yukio Edano said on Tuesday." See, they were only kidding. Or, a very clever Japan has decided to not "nationalize" TEPCO in the same AIG was not nationalized, with a whopping 2% of the outstanding stock remaining in private hands following an infinity to one dilution.
Wouldn't it be awesome if spin could actually solve problems? Then, you could just say the word 'recovery' every time you gave a speech, ignore any negative data, assume the markets are up because of general economic health and not a mass infusion of cheap money, and it would be so.
As reported earlier on Zero Hedge, the next step for TEPCO is most likely nationalization. While this is likely great for bondholders (if an American bailout model is consumed where there is no creditor impairment), it is not that hot for shareholders, who may lose most/all of their investment. Not surprisingly, we have just heard from Reuters that TEPCO shares are now suspended following the earlier nationalization reports: "Tokyo Electric shares were untraded due to a glut
of sell orders at 626 yen, down 10 percent from Monday's close. The
stock has lost 70 percent since the earthquake and tsunami." And so, the rules change in the middle of the game once again. Only this time it was visible from a mile away. In the meantime, those who are long TEPCO puts may experience a Chinese reverse-merger fraud moment, as the stock gets a T-12 halt and reopens sometime in 3 years on the Pink Sheets. And, incidentally, those who are long are some of the biggest financial entities in Japan including Dai Ichi Life Insurance, Nippon Life Insurance, Tokyo Metropolitan, Mizuho, Sumitomo, Bank of Tokyo.
Presented without comment
With The CFTC Position Limit Response Period Over, Here Are Select Opinions By PIMCO, World Gold Council And Goldman SachsSubmitted by Tyler Durden on 03/28/2011 - 19:21
The public comment period for the CFTC's proposed position limit rule has come and gone. It should come as no surprise to anyone (and particularly those transfixed by the massive surges in various commodities, among them most certainly gold and silver) that what is at stake here is not some actual position limit definition and subsequent regulation and enforcement (although that most certainly is), but yet another challenge to the klepocratic status quo which naturally prefers the status quo to remain as is, and public interests, which seeing 100% moves in the price of grain, cotton, corn, and other commodities, would obviously prefer to reign in speculative fervor. At the end of the day, Wall Street will find loopholes in whatever the end rule is as it always does, but the polemic on the way there is quite interesting. Which is why having combed through some of the last minute public comment submissions (of which there were 5,561 in total at last check), we present some of the most indicative ones: one the one hand that of Carl "Shitty Deal" Levin, Chair of the Permanent Subcommittee on Investigations, who obviously is for the most prompt implementation of position limits as envisioned in Dodd Frank, and on the other hand institutional money managers and traders such as PIMCO, Morgan Stanley, the World Gold Council, and, naturally, Goldman Sachs (oddly, we have yet to track down the response by one JP Morgan). We present these for our readers' perusal below.
Everyone's favorite Iceland expert, Fred "Napoelon Dynamite" Mishkin was on Bloomberg TV today. He said a bunch of stuff. None of it mattered, for the simple reason that as has been now confirmed beyond a reasonable doubt, Mishkin will say anything that he is paid $___ to say. In other words, only those who enjoy experiencing subdural hematomas from absorbing macrosievert emissions of hypocrisy, should subject themselves to the following clip. Incidentally, speaking of emissions levels, after observing the warm glow emanating from the former New York Fed member's epithelial covering, we open it up to debate: just what is the halflife of the "healthy and perfectly digestible" macrosievert emission from the "Dynamite's" skin?