Archive - Mar 16, 2011

The once-delayed POMO has just been completed as Primary Dealers did not have enough clout to delay it for a second time even as the 5 Years was surging. That the most monetized issued was the OTR just issued QJ2 CUSIP should not surprise anyone.

If this goes below 80, and it is about 10 pip away, it may get quite interesting, as a lot of derivative waterfall stops are located there. That the BOJ has still not intervened is very troubling. And the latest bad news from Japan: Tokyo Electric Power says water temperature at No. 5, and No. 6 reactors rising, was double normal level at 0500 GMT

IAEA SAYS CORE DAMAGE AT UNITS 1-3 CONFIRMED, SITUATION "VERY SERIOUS"
IAEA SAYS FUEL RODS EXPOSED IN UNITS 4, 5 AND 6
IAEA SAYS HIGHER RADIATION LEVELS FROM DAMAGED JAPAN REACTORS
IAEA SAYS TOTAL OF 4 JAPAN UNITS HAVE CORE DAMAGE

Forget a "Chernobyl-like" meltdown ... we're already getting bad scenarios from the spent fuel rods.

Confirming that the Fed's Weimar monetization practices are entirely dependent on the market, and that POMO can only proceed if the Plunge Protection Team does its job, the earlier cancelled POMO has been rescheduled for 12:05 pm now that the PPT-Citadel team is on the line and grinding ES like it is the new chick at Hustler Club. In other news, going forward, the terrorist will win if and when the bond market crashes at 10:59 am, which sends the entire Sack-Frost monetization model out of line. Next up: Article 15 to be implement in the US between the POMO hours of 10:15 am and 11:00 am, where any headline on Reuters or Bloomberg has to be precleared by an FRBNY NYU intern. Once again we get confirmation that when it comes to decisions on who really runs the country, the Primary Dealers who cancelled their entire POMO order book, come on top.

Can one spell headline risk:

• CHU SAYS U.S. THINKS `PARTIAL MELTDOWN' HAS OCCURRED
• SPENT FUEL POOLS CHIEF THREAT TO ENVIRONMENT, UCS SAYS
• SPENT FUEL POOLS HAVE SHORTEST `PATHWAY' TO AIR, UCS SAYS

The fundamental and technical pictures are now supporting a higher move in bond prices.

Who would have thought that monetizing our way to a bright Weimar future is "market contingent." With the EU dude crashing the market at 10:59 am and spooking the Primary Dealers, what does one expect?

Trust the EU to come in prancing with all the grace of a shroomed up, drunk bull in a nitroglycerin store.

• EU Energy Chief says possible catastrophic events in next hours
• EU's Energy chief says situation at Japan nuclear plant is out of control

As a reminder here is how one says the same, but just a little more diplomatically:

• IAEA sasy Japanese authorities have reported concerns about condition of spent nuclear fuel pool at Fukushima Daiichi units 3 and 4

This is about as pathetic as it gets. In order to deal with a new baseline level of radiation across Fukushima (which Japan still refuses to discloses to the world because it is "Under Survey"), the Japanese ministry of health labor has decided to take the unilateral act of scrapping years of safety data, and more than doubled the maximum allowable exposure for nuclear workers from 100 millisieverts to 250 millisieverts. At least we now know that the radiation level around Fukushima is most likely bounded by this range. As to the reason for the increase, the ministry said it is "unavoidable due to the circumstances." In other words, when self-administered Seppuku will not work, just apply it to someone else.

A stunning report from Reuters on how the crisis has transformed one of the world's most populous cities: "Areas of Tokyo usually packed with office workers crammed into sushi restaurants and noodle shops were eerily quiet. Many schools were closed. Companies allowed workers to stay home. Long queues formed at airports. As Japanese authorities struggled to avert disaster at an earthquake-battered nuclear complex 240 km (150 miles) to the north, parts of Tokyo resembled a ghost town."

Satellite imaging company Digitalglobe has just released its latest flyover image of reactors 1 through 4. Sadly, each one appears to have suffered extensive damage.

We present a handy real-time visual summary of radiation levels by Japanese prefecture. The levels in Fukushima and Sendai continue to be NA or "under survey" as the politically correct term is. We also show critical wind patterns as well as real time Tokyo power blackouts.

The following summarises what is happening at each unit, and the major risks

Stagflation, bitchez. PPI in February doubled to 1.6% on expectations of 0.7%, compared to 0.8% previously, and 5.6% Y/Y! This is the largest increase in finished goods prices since a 1.9-percent advance in June 2009. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 2.0 percent, and the crude goods index climbed 3.4 percent. On an unadjusted basis, prices for finished goods advanced 5.6 percent for the 12 months ended February 2011, the largest 12-month increase since a 5.9-percent rise in March 2010." And the stunner: "The index for finished consumer foods surged 3.9 percent in  February, the largest increase since a 4.2-percent climb in November 1974. About seventy percent of the February rise can be traced to higher prices for fresh and dry vegetables, which jumped 48.7 percent. Advances in the indexes for meats and dairy products also were major factors in the increase in the finished consumer foods index." And while inflation is everywhere, or at least for items people need, the housing market is now official dead. February housing starts came at 479K on expectations of 566K, a massive 22.5% collapse from revised January data, and the second lowest ever, better only to April 2009's 477K. Overall: complete stagflationary disaster, and one which means the Fed will use any excuse for QE3, inflation be damned.