Archive - Mar 21, 2011

Thermal images from Fukushima have just been released. One is based on data from German Die Welt, the other one comes straight from NHK. THE picture from Die Welt, emphasizing Reactor 3 and confirming that previous lies that all temperatures at Reactors 1 through 4, were under 100 degrees Celsius, were nothing but. Note the area indicating 128 degrees Celsius. We would assume that is the reactor core area (which refutes the lie). If, instead, that is the spent fuel rod area, then we have some very big problems, even if TEPCO is telling the truth for once.

The Fed’s policies are pretty much the exact opposite of what our country needs to get back on it’s feet... Not surprisingly, the markets are flying on the doomed Dollar.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 21/03/11

After a two weeks ago we presented a report from Alfred Little research indicating just what a potential scam the latest alledged Chinese fraud DEER is, the stock manipulation derby that ensued to keep the price above $11 was beyond criminal. That said, we are happy to present the latest piece of evidence from Alfred Little chipping away at the facade of this latest Chinese company soon to be delisted by the Nasdaq. Look for the stock to follow every other Chinese scam on the road to oblivion. That said, be careful in buying puts: it is nearly a certainy that following a trading halt any and all puts will expire worthless even as the stock opens just shy of $0.00.

According to Kyodo, the Fukushima sea fallout is getting material enough to where the sea soon won't need a blacklight to glow in the dark:

• Kyodo says radioactive caesium found in sea water 24.8 times limit
• Kyodo says radioactive Iodine found in sea water 126.7 times limit

The only logical solution is for the Japanese ministry of deadly disinformation to raise the radioactive Cesium sea water limit by 25 times, and that of Iodine by 127 times. And all shall be well.

It's another day, which means the probability of a Mohamed El-Erian op-ed is 99%. However, while in the past we may have ridiculed these now almost daily missives which lead many an LP to wonder just which media double of the real El-Erian is managing Pimco's $1.4 trillion in AUM, this one is actually worth reading as it ties in the recent developments out of Japan, with the firm's previous insistence that there will be no QE3. Oddly, this party line still has not changed: "Some will undoubtedly call either for a QE3 or for the extension of QE2. Others will warn against this type of “active inertia” in policymaking, noting that the repeated use of such an instrument will likely shift further the balance of outcomes away from “benefits” and towards what Chairman Bernanke, in his Augst 2011 Jackson Hole speech, correctly labeled as “costs and risks”. And remember, these costs and risks – or what at PIMCO we have analysed as collateral damage and unintended consequences – have consequential economic, financial, and political elements that play out both domestically and abroad. Taking all this into account, our inclination is that the hurdle rate for introducing a QE3 will prove to be very high, and rightly so."

The United States Department of Justice delivered a very clear and unfortunate message on Friday: “Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism. While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country.” These remarks were released by the US Attorney’s office in the western district of North Carolina following the conviction of one Bernard von NotHaus, the creator of the ill-fated Liberty Dollar. Somehow, though, I doubt that Homeland Security chief Janet Napolitano or Attorney General Eric Holder will end up labeling Mr. Bernanke as a domestic terrorist.

Even as the market has now apparently fully priced in Fukushima, the bad news continue coming:

• TOKYO ELECTRIC RADIOACTIVITY FOUND CONFIRMS FUEL DAMAGE: NHK
• TOKYO ELECTRIC DETECTS 5 TYPES OF RADIOACTIVITY, NHK SAYS

No surprise there: by now everyone is well aware that the fuel rods are if not completely then certainly partially destroyed. However, the real danger, and explains why we have been following atmospheric conditions over Japan so closely, is that as Kyodo just reported, the rain is now pouring radioactive cats and dogs. But the most troubling development is that instead of being proactive and finally warning its citizens about the dangers, the Japanese government has just raised the decontamination threshold by nearly 20 times from 6,000 cpm to a stunning 100,000 cpm. Is is rather safe to assume that this number was not picked arbitrarily.

Speaking of inflation – let’s consider this chart (from Doug Short) and what complete and utter bullshit the CPI is! Very simply, without looking at anything else – it’s housing. Housing is 42% of the CPI and declining housing costs have masked rising inflation for 5 years now.

Reuters has released another "must bookmark" chart showing just how dramatic the impact of recent geo[political|logical] events has been on everything from the S&P, to Nikkei, to gold, VIX, Treasurys, and pretty much every other relevant asset class.

Here are some excerpts from an interview forwarded to me by Mr. Lars Schall of chaostheoren.de with oil expert F. William Engdahl. Whether you agree or disagree with Mr. Engdahl’s theories, his insight always presents perspectives given almost zero coverage by the mainstream media. Much of the fraudulent and deceptive practices of big global banks that Mr. Engdahl discusses regarding the oil markets can be extended to other commodity markets such as gold and silver.

Who would have thunk it: Goldman advising clients to brace for high oil prices. In a note just released by Goldman's David Greely, the commodity analyst sees further upside "risk" to the price of oil as the black swan clusterflock flaps its wings ever stronger. "We estimate there is a $10/bbl risk premium embedded in oil prices. However, with the coalition airstrikes on Libya, damaged nuclear reactors in Japan, and continued risk of political contagion in the Middle East and North Africa, the risks to our forecasts are still to the upside." Furthermore, as we assumed a week ago, the so called demand destruction in Japan which pushed crude prices lower materially, will have a far more than equal and opposite reaction in oil prices once the restocking process begins with a material portion of Japan's nuclear capacity offline. "Concerns over the impact of events in Japan on the economy provoked a sharp, though brief, sell-off last week, but we expect the increased demand for oil-fired generation will far outweigh oil demand lost to reduced economic activity." And as always, in this market which is now entirely impervious to news flow, and in which jumps in gas prices imply a surge in GDP, any oil dip is to be purchased, especially since the marginal dollar is once again going toward the purchase of commodities.

In a crushing blow against the Fed and the banks that own it, in this case represented by the Clearing House Association, the Supreme Court rejected an industry appeal set forth by the CHA, that sought to keep critical bailout data from going public. The lawsuit was originally started by the great and late Mark Pittman, who tragically passed away around Thanksgiving 2009: we are confident we would be delighted to learn that his unprecedented act of suing the Fed in order to generate more transparency has finally succeeded. From Matt Winkler: " "At some point long before the credit markets seized up in 2007, financial markets collapsed and the economy plunged into the worst recession since the 1930s, the Federal Reserve forgot that it is the central bank for the people of the United States and not a private academy where decisions of great importance may be withheld from public scrutiny. As only Congress has the constitutional power to coin money, Congress delegates that power to the Fed and the Fed must be accountable to Congress, especially in disclosing what it does with the people's money."

To all those wondering why the Treserve scrambled on Friday to allow banks to resume paying dividends (even something as downright hilarious as Citi's $0.01...Is that the lowest recorded dividend yield in history?) here is your answer. The Treasury just announced it would sell its $142 billion MBS portfolio, supposedly to the same banks who are now using their cash on the books to satisfy shareholders too. The Treserve will sell $10 billion per month depending on market conditions, meaning a downtick in the market will now crash not only that given day's POMO (a UST market operation), but also have a reflexive impact on the entire MBS trading complex. As usual we can't wait for Directive #1 which will make selling any share an act of treason.

Central banks and sovereign wealth funds with massive exposure to the dollar, such as the Russians and Chinese, are not going to shout from the roof tops their intentions to diversify into gold and silver bullion as this would lead to a surge in bullion prices and an even greater depreciation of their dollar holdings. China imported 245.6 metric tons of silver in February. The figure is close to the 260.6 metric tons imported in February 2010 and suggests that the Chinese are more than willing to buy silver at over $30 per ounce. It also suggests that the record Chinese imports of 3,475,394 kilos seen in 2010 (a massive four fold increase from 2009) may be again attained in 2011. News that Iran and other nations with large dollar currency reserves have greatly increased their gold reserves (see News) will not come as a surprise to our readers. It stands to reason that they would given the degree of exposure which most creditor nations have to the U.S. dollar. It also stands to reason as some of them do not have cordial relations with Washington and may be reluctant to fund the U.S. continuing imprudent fiscal policies.