Archive - Mar 18, 2011

The Daily Mail has released a dramatic picture showing the emotional exhaustion of TEPCO managing director Akio Komori who is openly weeping as he leaves a conference to brief journalists on the true situation at Fukushima, following his acknowledgment that the radiation spewing from the over-heating reactors and fuel rods was enough to kill some citizens. "A senior Japanese minister also admitted that the country was overwhelmed by the scale of the tsunami and nuclear crisis. He said officials should have admitted earlier how serious the radiation leaks were. Chief Cabinet Secretary Yukio Edano said: 'The unprecedented scale of the earthquake and tsunami that struck Japan, frankly speaking, were among many things that happened that had not been anticipated under our disaster management contingency plans." This is precisely as Zero Hedge had expected would happen all along, following our recurring allegations of a massive cover up by the Japanese government. And furthermore as we predicted a week ago when we said that continued government lies and subversions would make the situation untenable once the population loses faith in the government, this is precisely what has happened.

The glorious president who has taken some time off from his extremely busy Ipanema tour schedule, is addressing the nation over the latest developments in Libya. Watch the prepared remarks being teleprompted live here.

This is not "Commie talk" people. If you are not one of the Forbes 400 you are either a victim or a victim-in-waiting because what do you think the 400 will do when the bottom 90% are bled dry?

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 18/03/11

The DXY has just breached the support from 2010 lows. Ben Bernanke's stealth plan to inflate the debt is working. In other news, the dollar is now one lap ahead of everyone in the devaluation race. On a real, not nominal, basis the S&P is now down 2.3% expressed in constant dollar purchasing power terms.

The good old old green 75% cotton/25% linen combination formerly known as the reserve currency continues shocking everybody with just how worthless it is, because even as the dollar jumped against the Yen, it plunged against the euro, and in the DXY basket the Euro weighting is about 4 times greater than the Yen. Meaning today the dollar will likely take out 2010 lows, and after that 2009, 2008 and so forth. Furthermore, the DXY has plunged in the past two days, just in time to completely neutralize any nominal increase in stocks values. In the meantime, that other hated metal, gold has risen by $30 in the past two days, reminding once again that until the Fed build an alchemist annex it will continue to be the only true store of wealth (and, yes, only true currency).

Judging from the relative volatility and the extremely wide holdings of this find company with a near cult like following, if price action breaks it will break very hard - and this time there may be fundamental justification for it.

According to a recent report from the Nuclear Regulatory Commission the California Diablo Canyon nuclear power plant (built in proximity to the San Andreas fault) which everyone always points to as the biggest earthquake risk in the US, is actually ranked 9th in the US in terms of earthquake risk (we somehow really doubt this). The top one? The same we wrote about yesterday as having had a leaking seal for the past 18 years according to the Union of Concerned Scientists - Indian Point in Buchanan, NY. Of course its proximity to New York City has immediately stirred cries of concern from the world's most banksterous city and demands for a shutdown by Andrew Cuomo. It has also prompted Reuters to release an evacuation map of the surroundings should "something" go wrong with Indian Point, an event which will likely only further instill a sense of soothing calmness and a "tranquility effect" in the New Yorker community.

No more copy paste from the world's biggest bond deflationist. A day after the NYT announced it will soon see its traffic plunge courtesy of a paywall, David Rosenberg says he is going the premium route as well. "Since first publishing Breakfast with Dave when I started with Gluskin Sheff + Associates back in May 2009, we had always notified our readership that the report was going to be made available on a free trial basis. For clients of our firm, the report is still going to be made available for free. But for non-clients, the free trial period will finish by the end of March. At that time, the Breakfast (and other meals) with Dave will become a paid subscription service with an annual fee of CAD $1,000." Sad - no more copy paste from one of the smarter macroeconomists out there.

Following the clusterflock of black swans that has hit world markets in the past month, the Fed has realized it needs to act quick to distribute money to undercapitalized bank shareholders ahead of the upcoming bank sector bail out, which will naturally be funded by taxpayers all over again. According to the Fed, the 19 worst banks in America (in other words those that are allowed to issue dividends) are: Ally Financial Inc. (no, really, f/k/a GMAC is healthy), American Express Company, Bank of America Corporation, The Bank of New York Mellon Corporation, BB&T Corporation, Capital One Financial Corporation, Citigroup Inc., Fifth Third Bancorp, The Goldman Sachs Group, Inc., JPMorgan Chase & Co., Keycorp, MetLife, Inc., Morgan Stanley, The PNC Financial Services Group, Inc., Regions Financial Corporation, State Street Corporation, SunTrust Banks, Inc., U.S. Bancorp, and Wells Fargo & Company. The surge in share prices of the mentioned banks confirms that this is nothing but the latest round of Fed-endorsed taxpayer rape, which nobody can do anything against as the Fed is an "unsupervised" entity, DC is owned by Wall Street, and the peasantry is downloading porn on their iPad.

From Kyodo: "Mizuho Bank said Friday the number of unprocessed transactions as a result of its computer system malfunction since Tuesday stands at 910,000. The unprocessed transactions include salary transfers to customers of both Mizuho and other banks, according to the key arm of Mizuho Financial Group Inc. Mizuho is aiming to fix the system malfunction by the end of the three-day weekend on Monday, it said." It seems reasonable to suppose that Japanese financial workers will be happier once they get their money, considering the prevailing mood in the country (incidentally we are confident a UMichigan confidence read in Tokyo would come at an all time high right about now). And don't fotget - sellside analysts were expecting an unpaid salaries number of 910,200, so the beat is decisively bullish.

After travelling in the first class confines of the Gulf/Jetstream for the past 3 days, the Fukushima radiation has finally reached California. This happens just as The Hill reports Obama has oredered a full review of all US nuclear power plants. Look for the nuclear pair trade to become all the rage in the next week. From AP: "Very low concentrations of radioactive particles believed to have come from Japan's Fukushima nuclear power plant have been detected on the U.S. west coast, diplomatic sources said on Friday."

The one aspect of the Japanese crisis that has so far received little attention is the component parts crunch that is starting to create its own earthquake through the supply chain. From Kyodo: "Concern over a shortage of components for manufacturers is spreading globally as many Japanese companies have been forced to suspend production in the aftermath of last week's devastating earthquake. Some of the effects have already surfaced, with U.S. automaker General Motors Co. suspending operations at a plant in Louisiana, while Chinese companies that rely on Japan-made parts are rushing to buy semiconductors." And while none of this matters to markets still basking in the radioactive warmth of the Bernanke Put, some are already sensing the impact on everyone's darling stock - Apple. iSuppli reports that the Japan quake could create iPad and iPhone shortages, a meme that is already pushing AAPL stock down. "The aftermath of the Japanese earthquake may cause logistical disruptions and supply shortages in Apple Inc.’s iPad 2, which employs several components manufactured in the disaster-stricken country—including a hard-to-replace electronic compass, the battery and possibly the advanced technology glass in the display, IHS iSuppli research indicates. The IHS iSuppli teardown analysis of the iPad 2 so far has been able to identify five parts sourced from Japanese suppliers: NAND flash from Toshiba Corp., dynamic random access memory (DRAM) made by Elpida Memory Inc., an electronic compass from AKM Semiconductor, the touch screen overlay glass likely from Asahi Glass Co. and the system battery from Apple Japan Inc." And the last nail is that as more production scrambles to be pushed to other locations, margins will plunge for all tech companies, forcing a wave of preannouncements within 2-4 weeks and crushing bottom lines. Welcome to the re-depression.

And just as the Fed confirms its first direct currency intervention since 2000 (who knew NYU interns could multi-task so well between stocks, bonds and FX, incidentally today's POMO is a lethargic $1-2 billoin monetization of TIPS), the USDJPY takes its first dip below 81 since the "Honda" Accord announcement last night. According to several sources the Fed spent 50 million in USDJPY purchases. Alas that will not be enough. And with the USDJPY continuing to leak lower, take back what we said about the multi-tasking efficiency of 25 year old FRBNY interns-cum-world tyrants in waiting. The attached charts shows why the Honda Accord (as it has now been tentatively named) will need many more steroid injections, which according to Nomura have already cost the ECB at least $5 billion.

Even though last night's G7 Yen intervention still has no name, it likely will very shortly. After all, all key previous global currency interventions have received names according to where they took place, notable ones being the Plaza Accord from 1985 which took place in the Plaza hotel in New York in 1985, which was supposed to depreciate the dollar against the Yen (in essence the opposite of what happened last night), and the Louvre Accord from 1987 which was the aftermath of the Plaza accord which worked so well two year later the central powers met again to halt the ongoing dollar depreciation (primarily against the Yen and the Mark). So how successful have these operations been historically? Well, when it comes to killing the dollar (Plaza) the success rate was stunning. So stunning in fact that as noted, another accord had to be implemented to halt the $ decline. That one did not work out so well: in fact following the Louvre Accord the dollar continue to decline for another 2 years! So if last night's attempt to strength the dollar (weaken the yen) is to be judged by historical precedent, the half life of the G7 intervention may be extremely short lived.