Archive - Mar 2011

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...

Well, the idiot regulators, market monopolists, frontrunning algorithms, and, of course, Hewlett Packardian central planners have finally succeeded in driving everyone else out of the shark pool. Calling today's volume abysmal would be an insult to abysses everywhere. The OED is now in need of a word to explain the kind of market volume that appears to be part of the new Vissarionoviched normal. As we closed T+3 prior to Q1 settlement, stocks meanders without direction then saw nearly 1 billion in market on close sell orders. And what is far worse for the momo lemming brigade is that despite the negligible volume is the market, which traditionally manages to levitate courtesy of rebate collecting HFT stock churners, the wealth effect denying sell off could not be prevented. Is the Fed losing its market manipulating touch?

The scientists at the Central Institute for Meteorology and Geodynamics (ZAMG) have released their most recent near-term forecast of Iodine-131 dispersion. The combination of local weather forecasting and emission prediction results in the following animated dispersion map. ZAMG's google-translated narrative: "Today there was a weak disturbance with light showers in northern areas of the impacted area, but no precipitation from Fukushima to Tokyo. Winds are from the northwest, rotating somewhat during the day on Southwest. The next morning a few weak showers are possible, but it will be mostly dry. Wind mostly from southern directions. The day after tomorrow a weather disutrbance is approaching that  brings in the impact of precipitation. The wind will turns to westerly. The dispersion calculations show that today a potential radiation cloud of the southeast Pacific is transported to the so away from Japan. Tomorrow by rotation of the wind on the Pacific Southwest further transport to be expected. Tomorrow, inland areas may also temporarily be affected." Look for readings in Ibaraki prefecture, and in Tokyo, to jump should this happen.

It used to be primarily schools and banks. Oddly enough, bomb threats have now moved on to the world's most "beloved" company. Apple Insider reports: "A bomb threat at Apple's distribution center in Elk Grove, Calif., has forced an evacuation of three buildings while emergency personnel assess the potential threat. People with knowledge of Monday's ongoing incident informed AppleInsider that the eastern three buildings A, B and C have been evacuated at the Apple Sacramento Campus. The site is used for receiving, warehousing and logistics, and is comprised of three warehouses totaling 450,000 square feet." Unclear if there were any more suicides at FoxConn to accompany this curious development.

Update: first market post news: 300-350; 100 bps tighter.

Per Yomiuri, TEPCO may be up for nationalization, precisely as we had predicted, due to the insurmountable amount of accrued liabilities from the Fukushima disaster which would bury a standalone company. And just as we rode the CDS on the way up from 90 to 460, so now is the time to assume there will be no credit risk whatsoever, now that TEPCO is the first ever non-bank Japanese TBTF. Time to bail as central planning is about to branch out.

Atlanta Fed's Lockhart is out with another prepared speech (and this week we will get over ten of these; keep in mind this is all talk - when it comest to voting, Hoenig was the only man who actually could not be accused of hypocricy). Lockhart weighs economic headwinds and tailwinds and comes to a net positive outlook for the rest of 2011 and 2012. Headwinds holding back economic recovery include continued declines in home prices, higher food and energy prices, crises abroad, and fiscal adjustments. Favorable forces—tailwinds—that are pushing the economy forward include improved household finances, moderate employment and income growth, and corporate profitability and ample liquidity. Per Dennis, the financial system continues to heal, supporting growth, although lenders remain conservative and some businesses and consumers still have only limited access to credit. Lockhart foresees continuation of moderate growth, gradually declining unemployment, and the settling of price movements around an inflation rate that is consistent with the Federal Reserve's price stability objective. While short-term measures of inflation have accelerated in the last few months, in Lockhart's view this trajectory will not continue. Lockhart believes that growth in overall consumer prices—at around 2 percent per year through a period of three or four years—is consistent with the Federal Reserve's price stability mandate. He continues to see this objective as attainable. Lockhart remains satisfied with the current stance of monetary policy but is prepared to support a change of policy if evidence accumulates that the low and stable inflation objective is at risk. In other words, Lockhart likely saw subprime as contained back in 2006. In other words, Lockhart most certainly saw subprime as contained back in 2006. The kicker from Lockhart's speech: "contrary to popular opinion, Fed officials actually do eat and fill up their gas tanks." That's admirable: is it with banker money though?