Archive - Mar 28, 2011

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."

The hedge fund industry's strong rebound from the credit crisis has prompted investors to ask whether some funds have grown too large and inflexible to keep delivering bumper returns for which the sector is famous. Are these concerns justified?

Thus, to say that the US Dollar and debt system are broken would be the understatement of the century… However, the US Dollar has become a massively lopsided trade with investors betting heavily on its demise. When you consider its position relative to the Euro (another doomed currency), it is clear that the US Dollar could bounce just based on the lopsidedness of this situation.

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

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?

Well, we know at least one bank has some sizable, non-grandfatherable commodity block positions. Per Reuters:

• BARCLAYS SAYS CFTC SHOULD DEFER DECISIONS ABOUT NATURE AND EXTENT OF POTENTIAL LIMITS UNTIL AFTER IT COLLECTS NEW DATA ABOUT OTC MARKETS

Why Barclays thinks CFTC does not have data on OTC markets is beyond us. So while we await the CFTC to issue its decision on position limits, any minute now, we wonder just how many other banks (wink wink Blythe) will follow up with comparable objections demanding an "indefinite" delay to what may soon unleash true price discovery, particularly in the PM market. And incidentally, whatever happened to the Fed's mandated disclosure of the confidential bank rescue information. At what point will Ben Bernanke be held in contempt to court for not following the decision of the Superior Court?

Presenting an explanation of the dynamics of the Japanese iron triangle: politicians, ministries and big business, by someone who knew what he was talking about...

"In order to maintain the status quo, you have to educate people, and this is where "castration" comes into play. The Japanese bureaucracy wants the people to be as obedient as sheep. Not to complain. Not to challenge the system. Not to resist their superiors. For individuals to enslave themselves to the system. If one is educated to embrace these values, then Japan as a system can maintain harmony... However, in order to imprint these values, you need a special technique, which is to halt the growth of identity..."

Reuters' Goran Tomasevic has compiled what is without doubt the definitive photo collection of Libyan (and middle east in general) civil war photographs. While the outcome of the Libyan conflict is far from clear, it is certainly well documented. The full gallery can be seen at Reuters (link). Here are some of the most representative photos:

Certain indication from the Fed that QE2 could end early would bring considerable unwinding, disproportionately biased towards commodities, as nobody on Wall Street is currently positioned for that.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 28/03/11

Call us dumb money but we were short oil, short silver and long on the Dollar last week...