The surreal black swan clusterflock continues its trek through the world: "The BOJ offered a combined 15 trillion yen ($183 billion) into the banking system on Monday in its first same-day market operation since the Greek debt crisis in May last year, to soothe market jitters in the wake of a devastating earthquake and tsunami that struck northeast Japan on Friday. The central bank's policy board will likely discuss whether the sharp fall in Tokyo stock prices and the potential damage from the quake to corporate profits warrant an immediate policy response, the sources said." And we have since learned that the extra 3 trillion will be use to buy government bonds. Hello QE, my old friend.
As a new 5 meter Tsunami is expected to hit Fukushima again, and residents are being advised to immediately get to higher ground, an explosion had been heard coming out of Reactor #3 at the power plant at 11:08 am local time. Supposedly this is a hydrogen explosion just like on Saturday, although the credibility of everyone involved at this point is zero. Dow Jones confirms that only the shell of the third reactor remains.
Follow the latest at NHK in what is becoming the most surreal news night in history.
An advance look at data to be released in under 2 hours from the previously discussed OperationLeakS indicates that tomorrow may be a very bad day from John Paulson, David Tepper and the rest of the "don't fight the fed" crowd.
And just when oil was tapering off on hopes that the Middle East supply situation may actually normalize, we get this from The Guardian: "Saudi forces are preparing to intervene in neighbouring Bahrain,
after a day of clashes between police and protesters who mounted the
most serious challenge to the island's royal family since demonstrations
began a month ago. The Crown Prince of Bahrain is expected to formally invite security forces from Saudi Arabia into his country today, as part of a request for support from other members of the six-member Gulf Co-operation Council." Pretty mich just as we predicted earlier. And yes, this is huge as Iran will promptly respond, setting off dormant religious tensions with a bang.
Now that the market has had some time to digest the events over the weekend, it may be time to hedge risk on the company most exposed to the nuclear shock in Japan, Tokyo Electric Power Company. The company was just downgraded by Goldman Sachs to Neutral (which means it held it as a Buy until now) as the firm does not see "a dividend hike"... We see far greater issues for the company's equity investors than just a dividend hike. Number one: TEPCO (9501.T) has over $90 billion in debt and roughly $30 billion in equity buffer. As Bruce Krasting points out vis a vis the equity - "it's gone." More from BK: "I used to work on financing these things. It's all long term leases. The actual debt behind the power plants is multiples of what they show on the balance sheet."
"Increased volatility and a wider trading range from current low levels in $/JPY mechanically increases the likelihood of marking new record lows below 80. As seen in the past, this could lead to some disruptive price action. We doubt that the Japanese authorities would want to expose their economy to a potential exchange rate shock in addition to the earthquake. The authorities have already made clear that they will do their utmost to stabilise markets, and while the focus has been on liquidity interjections in local money markets, this commitment likely includes an FX intervention threat in case of disruptive $/JPY price action." - Thomas Stolper, GS
BOJ Injects Unprecedented 7 Trillion Yen In Money Markets As Tokyo Stock Exchange Circuit Breakers ActivatedSubmitted by Tyler Durden on 03/13/2011 - 20:27
Contrary to expectations that the BOJ would injected "only" JPY2 trillion in its emergency operation earlier, Shirikawa came out with a stunner, putting in a whopping 7 trillion yen into Japanese money markets. From Reuters: "The Bank of Japan on Monday injected a hefty 7 trillion yen ($85 billion) into the money market in a same-day market operation aimed at soothing market jitters after a massive earthquake and tsunami hit northeastern Japan. This was the central bank's first so-called same-day operation since last May, when the Greek debt crisis roiled the global financial markets. BOJ Governor Masaaki Shirakawa said on Sunday that the central bank would provide huge amounts of liquidity to the banking system on Monday, reinforcing the bank's determination to keep markets stable in the wake of the disaster." In the meantime, after the Nikkei has plunged over 5%, and the Topix down by 7%, circuit breakers have been activated on the Tokyo Stock Exchange. Elsewhere, the US plunge protection is hard at work, sending futures surging from the overnight drop, after reality threatened to impose itself. Another masterful showing by Sack Frost.
As the dollar plunges (supposedly on news of that Frankenstein of a Euro treaty announced on Saturday morning and on capital repatriation in Japan) the real reason for the plunge can be found in the action of the precious metals, where both gold and silver are about to take out period highs on more imminent global fiat dilution.
As per the BBC, newly emerged footage shows the force at which the tsunami struck Japan's coast. In the fishing port of Miyako, in Iwate prefecture, boats were overturned, while video from Kamaishi city shows cars being dragged down city streets by the water. Footage courtesy of TV Asahi.
While nobody has any idea just what lies in store in the coming week which is expected to be abnormally volatile, here is a summary of the key economic events from Goldman's FX desk. "It all came at once last week with the major drivers of market price action rolling across the newswires on Friday. Front, back and centre stage was dominated by the still unfolding tragedy in Japan. First and foremost our thoughts are with those affected by the situation. In terms of asset markets, it is tough to draw concrete conclusions until we have a greater handle on the monetary cost of the disaster which is likely to run into trillions of Yen. There are also many potentially offsetting economic forces at work after a natural disaster, which we will try to assess in coming days and weeks."
The Eurozone summit arguably produced a positive surprise in that steps have been taken to a final political deal at the European council meeting of 24/25 March...The week ahead will continue to focus on developments in Japan and the Middle East and any further political commentary associated with the European summit. The BoJ has shortened its monetary policy meeting to one day on Monday. In addition to pledges to provide ongoing liquidity and the maintenance of financial stability, the BoJ may decide to extend the QE proposals from September in order to shore up confidence
No one can predict exactly how this will all shake out, but Doug Casey has long said that a return to a gold standard, or some modern equivalent, is almost inevitable. That’s because, for the reasons Aristotle outlined 2,000 years ago (it’s durable, divisible, consistent, convenient, and has intrinsic value), gold is hands-down the world’s best money. Now, Gresham’s Law tells us that bad money drives out good, but that’s only true when legal tender laws hold sway (incentivizing people to hoard what’s perceived to be “good” money and spend the “bad” money as fast as they can). When people give up on the local legal tender, Gresham’s Law goes into reverse, and good money chases out bad. The dollarization of third-world economies is an example of this, the dollar being perceived as being good when compared to many shakier currencies.
For all who want to be up to speed with all the latest developments out of Japan, below we provide our readers with a live feed from the NHK, or the Japan Broadcasting Corporation.