Archive - Mar 14, 2011 - Story

Finally, we have a true liquidation flight to safety. We expect the Fed will come to market with an announcement before market opens tomorrow.

DJ Tokyo Metropolitan Govt: Radiation Level 23 Times Normal Amount
DJ Tokyo Metropolitan Govt: No Immediate Harm To Human Health From Radiation In Central Tokyo

The only sensible thing to do in this complete market collapse

Per Kyodo, the northeastern winds have carried the radiation from Fukushima all the way to Tokyo. The only prudent thing that the authorities can do right now is to shut down all public equity markets immediately to prevent widespread panic resulting in a repeat of the liquidity collapse of 2008.

All hell is currently breaking loose following an explosion at reactor #2 and a another hydrogen explosion at reactor #4 per Kyodo, leading to a 16% drop in Nikkei futures as blind panic grips Japan. Kyodo essentially confirms there was a reactor meltdown as radiation levels at Fukushima 3 are now 400 times legal levels. And topping it all Japan's warning that all people within 30 kilometers from Fukushima should stay indoors and that the radioactive winds may reach Tokyo in as little as 8-10 hours. The BOJ has just intervened to prevent the yen from surging, as the following chart shows. Our prayers are with the people of Japan.

For all who have been looking for realtime radiation data from Japan, you are in luck. Or maybe not, as the data unfortunately indicates nothing good. The System for Prediction of Environment Emergency Dose Information (SPEEDI) releases gamma radiation data online. The site is jittery and apparently not suited for major traffic which is why we represent several screen captures of the data. While it is not surprising that according to the website both Miyagi and Fukushima prefectures are entirely "Under Survey" as it makes sense that the government does not want to generate panic, SPEEDI has disclosed some tell-tale data about cities in Ibaraki prefecture, which is just a hundred or so miles north of Tokyo, and is just south of the ill-fated Fukushima prefecture. And the data is stunning: based on a N, NE and NNE wind direction (where it originates), meaning all coming from Fukushima, with a normal reading in the 80 nGy/h range, the city of Kounosu Naka is at 3,024, Kadobe Naka is at 2,416, Isobe Hitachioota is at 1,213 and many others are in the mid to upper triple digit range! Again, this is based on wind coming out of Fukushima and ultimately headed toward the capital. Indicatively, normal terrestrial plus cosmic gamma radiation is about 80 nGy/h.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 14/03/11

And so the US Treasury has hit the proverbial paycheck to paycheck sustenance level. After burning $12.8 billion (without a change in gross debt) in cash today alone, and $75 billion in the month of March so far, primarily driven by a back end-loaded tax refund calendar, according to the Daily Treasury Statement, today's cash balance dropped to the scary level of just $14.2 billion. Without the benefit of incremental funding, this is the same amount that the Treasury burns on a good day! In other words, we take back what we said about the US Treasury existing paycheck to paycheck - Geithner now has to scramble to find funding on a day to day basis. If tomorrow operating outflows surpass $14.2 billion (and, again, the amount was $12.8 billion today) the world's "greatest" country (i.e. banana republic) runs out of cash, period. And as the following schedule indicates, there are no Long-Term bond issuances until next week (and the Bill issues are merely funding of rolling issues), we have some trouble seeing how the US Treasury will fund itself for the balance of the week...

For Japan, it's nowhere near over, at least if the Pasadena Jet Propulsion Laboratory (creator of such brainiac things as the Mars rovers) is correct. While Japan has experienced numerous magnitude 5 and 6 aftershocks (405 in total to be precise), the big ones are still to come: "Japan's largest quake on record, which hurled a 7-meter (23-foot) wave
landward after one plate slid beneath another off the coast of Sendai,
had an 8.9 magnitude. The aftershocks will likely include at least one
measuring 8 and 10 of magnitude 7, JPL geophysicist Andrea Donnellan
said. All are many times larger than the 6.3-level New Zealand quake in
February that leveled the Christchurch business district and killed 160." Should we get more 8+ earthquakes, the likelihood of further tsunamis unfortunately jumps exponentially. And while scientists have long been expecting "the Big One" to hit Los Angeles so far without success, unfortunately carrying over that logic to Japan is more than naive.

If the following letter posted by the BBC Blog is indicative of prevailing popular mood in the Japanese capital now that the government has lost credibility (as Zero Hedge predicted on Saturday), Tokyo may soon be a ghost town.

Mikan in Tokyo writes: "There is a growing sense that the Japanese
government is not telling us the true story. On one end, there is the
Japanese media that plays down the nuclear drama and focuses on human
drama, and at the other, the foreign media is up-playing the nuclear
disaster. In my company I heard at least half the essential staff is
being sent to Hong Kong, Singapore or even Sydney. I am preparing to
leave Tokyo and/or Japan. So are many of my friends. There is a sense of
deserting Tokyo as soon as possible."

All those hoping (here's looking at you Mo) to see a prompt bounce back in Japan to baseline economic levels may be in for some disappointment. Reuters reports that according to various sellside analysts, the impact to Japanese GDP (which is virtually tied with China for the world's second largest economy), could be anywhere between 3 and 5%. "Quake-hit Japan  faces a recovery and reconstruction bill of at least $180 billion, or 3 percent of its annual economic output and more than 50 percent higher than the total cost of 1995's earthquake in Kobe. The Kobe earthquake is estimated to have cost $115-118 billion, or 2 percent of GDP in 1995 terms. This time -- in a still unfolding disaster -- initial estimates from Credit Suisse and Barclays put the cost at $180 billion. Mitsubishi UFJ Securities and Sarasin expect the cost could run as high as 5 percent of GDP. Mitsubishi's estimates take into account a wider economic cost including a loss of tax revenues, subsidies to various industries of the affected area, loss of productivity following rolling blackouts on top of straight reconstruction costs." And it could be far, far worse: "some extreme projections of the longer-term cost look at figures closer to $1 trillion over several years." And as we first quantified over the weekend, the reinsurance caps for real estate losses are maxed out at about $60 billion. Which means either the government will leave those with insurance policies to split pro rate proceeds that refunds amounts owed at a big haircut, or in tried US fashion, will have to step in with emergency transfer funding measures, capitalized through the issuance of tens if not hundreds of billions of new debt. As for who will buy that debt, we look forward to Bill Gross' next letter for clues thereto. In the meantime, look for global GDP to be cut by at least 1-2% by the sellside pundits "shortly" especially as the way for QE3 is paved by the likes of Jan Hatzius who is lucky to have a force majeure on his second "Golden Age" call.

Gold’s continuous ten-year rise hasn’t sheltered it from controversy. Despite producing consistent returns in virtually all currencies year after year, some market pundits still question its validity as an asset class. It’s true that gold doesn’t pay any interest, and it’s also true that much of the gold produced throughout history still exists in some form today. But these characteristics shouldn’t inhibit it from performing as a monetary asset. Cash, after all, doesn’t pay real interest either, and there is more fiat money in existence today than ever before. So why does gold still receive such harsh criticism?

We believe much of it stems from a widely held misconception that gold is forming a financial bubble. It’s a fairly straightforward view – that gold buyers are merely foolhardy speculators buying on a whim with no rationale other than to sell to the ‘greater fool’ at higher prices in the future. It’s a view that assumes that gold has no intrinsic value and is simply a speculative asset that has captured investors’ imaginations.

We don’t take these views on gold lightly. We’ve seen bubbles before and fully know how they end. We have no interest whatsoever in participating in some sort of speculative frenzy – that’s a recipe for disaster in the investment business. Thankfully, however, our gold investments present no such risk. As our analysis has revealed, gold is actually a surprisingly under-owned asset class – and one that has generated far more attention in the media than it probably deserves. While its exemplary performance since 2000 is certainly worthy of discussion, gold simply hasn’t commanded enough investment to warrant the bubble fears it seems to have aroused among market pundits and business commentators. The truth about gold is that most people simply don’t own it…yet.

Zero Hedge first observed the duration mismatch in US Treasury holdings back in November 2009, when we highlighted the concerning amount of debt that the government has to roll every year courtesy of about 30-40% in outstanding paper that is of very short duration (under 2 years or so). We have also been pretty adamant that by now the US economic system is nothing but a ponzi scheme pure and simple. Today, we observe how this epiphany manifests itself when it occurs to a congressman, in this case John Campbell (California). The punchline: "I understand that the Fed and the Treasury are trying to keep interest rates low and improve the economy and the deficit. But, when coupled with the huge deficits, these moves look a bit like a Ponzi scheme that will soon unravel." Amen brother.

Charlie Sheen’s epic meltdown has dominated America’s asinine media conversation for the past few weeks. Charlie has never been a bigger celebrity than he is now as he runs around creating new words for the English language (tigerblood, biwinnning), garnering millions of twitter followers and appearing on multiple media outlets. The latest reports indicate that a massive lawsuit will be fought between Warner Brothers and Sheen with Sheen demanding hundreds of millions of dollars in compensation. “I have mouths to feed,” Sheen was quoted as saying. While it might seem surprising that a man who made almost $2 million dollars an episode for his last season of 2 and a Half Men would desperately need money, the fact is that Charlie’s fiscal health might be as potentially deteriorated as his mental health. As we all know, Charlie’s favorite past time is coke and hookers. Consuming coke and hookers is pretty expensive. A life spent swimming in the two cannot just dent your net worth but in Charlie’s case it can practically destroy it. Now, I don’t have all of Charlie Sheen’s coke and hooker receipts. What I do have though is a snap shot of Charlie Sheen’s finances in early 2008. These finances became available as a result of a divorce that Charlie Sheen had with his ex wife Brooke Mueller. At that point, Charlie Sheen had assets of roughly $24 million with outstanding debt of $8 million for a cumulative net worth of $16 million. The majority of the assets consisted of home and furniture and he had only $3,000 in a retirement account – see below.

Team Greyhat has just hacked the website of the Jishou Audit Office, a Chinese government property. Following Saturday's announcement by the Anonymous hacker syndicate of "civil disobedience" until Ben Bernanke steps down, how long before some US government websites are defaced in a comparable way? And just how hackerproof is Fedwire anyway?