Archive - Mar 28, 2011

The main banner ad running on Zero Hedge this morning said: "Public Health Alert: Reishi May Help Avoid Radiation Injury". I've done a little research on the topic, so - for those who are interested - here's a little background ...

According to Bloomberg, the New York Attorney General has petitioned the NRC to force Indian Point to meet fire rules (which probably means they were not meeting them before, and also confirms the NRC is another farce of a regulator). If this gains traction, and it will, watch for Indian Point to be offline shortly. So once Indian Point is shut down, will New York by on a 3 hours on 1 hour off rolling black out or 2 on 2 off? We should find out soon.

How can we compare Japanese radiation levels to "background radiation" ... when radioactive cesium and iodine DON'T EXIST in nature?

Shit just got real. The spin? It is not harmful to human health. Oh really? We can't wait for Kan to eat some plutonium on national TV to confirm this. In the meantime we await the retraction from TEPCO claiming they made a mistake and they really meant platinum not plutonium. Lastly, it appears that this is merely yet another attempt at hiding real time data: "TEPCO vice-president Sakae Muto told journalists at the company's latest briefing that test results showing the plutonium came from samples taken a week ago."

The Dallas Fed diffusion index is out, coming at a disappointing 11.5 on expectations of 18.4, with the market completely ignoring it. After all good diffusion index data is to be bought even if it confirms surging inflation, and bad diffusion index data is to be avoided. And while the component data is pretty bad (projected wages and benefits 6 months ahead plunge by 12 points as do Capital Expenditures, as firms refuse to spend any more organic cash on growth, offset by expectations of lower input costs, which remains TBD), the true nuts and bolts of the index can be gleaned from the respondent surve, presented below, although the most relevant one is here: "Prices are high,
which makes for lower volume. The supply of cattle is limited. The cost
of grain for livestock is unusually high because of high corn prices,
partly attributable  to ethanol subsidies. All of our raw material costs are at record highs. The cost of diesel also hurts us. A weak dollar is not good for us." No surprise there.

Another day, another imminent perpetual trading halt of a Chinese reverse merger or some other imported domestically listed scam. Today's target (which is not new to adverse research reports - recall that Upton Sinclar Research recently present a comparable fraud case recently), per Alfred Little research, is Chinese company China Integrated Energy (CBEH), which Alfred Little spares little kinds word for: "China Integrated Energy, Inc. (NASDAQ: CBEH) is a complete hoax, according to a detailed investigation by the International Financial Research & Analysis Group (“IFRA”) commissioned by one of its hedge fund clients." Considering all the other words previously lashed out at CBEH, this may be one of the less scathing reports we have seen out there. That said, there is little to look forward to for stockholders per this report, as Alfred Little concludes "CBEH shareholders will almost certainly ecover nothing."

The much anticipated Global Tactical Asset Allocation quarterly update from Damien Cleusix is finally out. Arguably one of the most comprehensive equity market overviews, we present it in its entirety for our readers' enjoyment.

Residential real estate is a downright mess, and its getting worse despite multiple proclamations from Treasury Secretaries past and present that the worst is behind us. We have already qualified, by any metric imaginable, as a real estate depression. Is anyone curious as to how we got here? Well, I have some keen observations...

Remember, the interest-rate based derivatives market in the US is $196 TRILLION. If the Fed lets interest rates get out of hand, then the entire system breaks down even worse than it did in 2008: 2008’s crisis was triggered by the credit defaults swap market which was just $50-60 trillion in size (less than 1/3 of the interest rate based derivatives market).

Following last week's deplorable durable goods number, and the subsequent Goldman warning, i.e. "the data increase the sense of downside risk to our Q1 GDP estimate of 3.5%", Hatzius has just stepped it up a notch, adding a key adjective confirming it is just a matter of time now: "The latest real consumption figures - including revisions to earlier months - point to growth for Q1 as a whole of approximately 1.75-2.0% qoq annualized. This compares to our current forecast of +3.0%. The report therefore implies significant downside risk to our Q1 GDP estimate of +3.5% qoq annualized." We give it two weeks.

While there was no surprise in this morning's release of the PCE data, which came at 0.2%, on top of expectations, and unchanged from January's revised 0.2%, it was the action at the consumer level that was notable, as Spending increased from a revised 0.3% to 0.7%, on expectations of 0.5%, while personal income declined notably from a revised 1.2% to 0.3%, below expectations, as US Consumer had to dip into their savings in the month of February. On the Personal Savings Rate: "Personal saving -- DPI less personal outlays -- was $676.7 billion in February, compared with $710.5 billion in January.  Personal saving as a percentage of disposable personal income was 5.8 percent in February, compared with 6.1 percent in January." As the chart shows, personal savings continue to trend in the 5-6% range, indicating that consumers are still uncertain whether to splurge or continue deleveraging.

With TEPCO unwilling (or unable) to disclose consolidated detailed information about the status of its reactors, the task has fallen on third party analysts. Luckily, Jorge Stolfi of the state university of the State University of Campinas in Brazil, has compiled what is probably the most comprehensive data dump of all key Fukushima reactor indicators including water level, core, drywell and torus pressure, as well as temperature at the core bottom and nozzle. Below are the detailed results for each of the fuel loaded reactors since the start of the crisis.

Tsunamis to the left of me TEPCO Clowns to the right...

Markets positive in the U.S., but mixed globally as this week will show the results of Ireland’s bank stress tests and possibly more events related to Portugal’s growing debt crisis. Speculation abounds this morning as to the future of QE2 as St. Louis Fed president James Bullard called the program into question. Germany sold €2.66B in 12M bills at 1.2649% v 1.0636% prior with b/c at 2.2x v 2.0x prior while waiting on ECB president Trichet’s statement today that may reaffirm his rate hike plan. German Chancellor Merkel’s CDU party showed further weakness in regional elections yesterday as the Green party and its anti-nuclear platform surged in the polls. The election results prompted the CDU to announce that most of the country’s older nuclear power plants will be shut down. Japan’s nuclear crisis persists as high levels of radiation at the power plant delay reactor cooling efforts.

More bad news for Portuguese bonds which just traded at lifetime high yields. From Moody's: "We are lowering our long- and short-term counterparty credit ratings on the five Portuguese banks and two related subsidiaries that we rate. The long-term ratings remain on CreditWatch with negative implications. The negative CreditWatch implications reflect the possibility of a further sovereign downgrade, which we expect could take place as early as this week, and its direct and/or indirect impact on our view of Portuguese banks' creditworthiness."