Archive - Mar 17, 2011 - Story

While Japan has been closely guarding radiation data particularly in the most impacted Fukushima region very closely, Zero Hedge has procured a fallout map showing radiation levels in the immediate NPP vicinity. To our surprise, despite Northwesterly winds (i.e., those blowing from that direction), the bulk of the fallout is concentrated precisely in that direction with a reading area 30 km NorthWest (see Reading Point 21 on the map below) of the plant showing reading of up to 80 microsieverts. What is perplexing is that the readings by the Japan Atomic Energy Agency (JAEA), unfortunately just two of them, differ from the official ones Ministry of Education, Culture, Sports, Science and Technology (MEXT) substantially. The materially higher readings reported by JAEA are notable outliers despite readings in a proximal region by MEXT indicating substantially lower readings. Is the Ministry of Truth now directly experiments with the radioactive tolerance of people by cutting the odd zero here and there?

As part of the Federal Reserve's ongoing QE2 program, nearly each day, the NY Fed purchases US Treasury securities from a select group of primary dealers in what is called a permanent open market operation (POMO). Ordinarily, the auction begins at 10:16 am and ends at 11:00 am Eastern. While the exact mechanics of the operations are not public, the NY Times published an article about the team that manages them here, divulging a few details, which we subsequently analyzed here. Only minutes before yesterday's auction was scheduled to complete (while most, if not all, offers from the primarily dealers were presumably in), the European Union’s energy commissioner warned of ‘further catastrophic events’ at Japan’s stricken nuclear power plant. Shortly thereafter, the NY Fed cancelled the POMO--to our knowledge, an unprecedented act. According to Tyler Durden of Zero Hedge, Reuters reported the cancellation at 10:57 or 10:58 am. Using 5 Year Note futures as a proxy, we have calculated the difference in average price between what the NY Fed would have paid had it not cancelled the first auction versus what it actually ended up paying: $15.7 million ($12.1 million for the 5's and $3.6 million for the 7's). This amount was simply pocketed by the primary dealers and is now a liability of the Federal Reserve, and putatively the US taxpayer.

Markets mostly positive this morning with the exception of Asia, as the announcement of tomorrow’s G7 meeting on the financial situation in Japan soothed investors. Nuclear worries prevail in Japan and the Pacific. The G7 will meet tomorrow about Japan’s earthquake and yesterday’s record rise in the JPY. Discussions will likely revolve around JGB buying efforts and exchange rate intervention. BOJ typically targets the US/Europe overlap timeframe for intervention.

The resilience of those living in the Japanese capital has been beyond admirable. After experiencing a record earthquake, hundreds of aftershocks, a historic tsunami, radioactive catastrophy 160 miles away and constant fears a northeasterly wind can bring in radioactive snow, and now unending rolling blackouts and ATM service interruptions, one has yet to hear about any mass exodus let alone coordinated complaining. That may all soon to change: Reuters reports that citizens are becoming increasingly restless and weary: " As authorities struggle to avert catastrophe at a crippled nuclear-power complex 240 km (150 miles) to the north, Tokyo faced a test of nerves almost a week after a massive earthquake and tsunami struck. Some residents are leaving, some are applying for passports or hoarding what they can -- from food to cash and gold, a safe haven during times of crisis. Premiums for gold bars rose to as much as $2 an ounce in Tokyo. At the second-floor office of the Tokyo Passport Centre in the city's Yurakucho district, queues snaked to the first floor." In other words the mass exodus we have been predicting for 3 days now, appears imminent: ""We don't know the reason but suddenly since yesterday we have had 1.5 times more people than usual coming to apply for a passport or to enquire about getting one," said Shigeaki Ohashi, an official at the passport centre." You really don't know the reason. Really?

Yesterday's speculation that a bank holiday was suggested and may be imposed in Japan due to unprecedented market swings and tens of trillions in support from the BOJ has just been confirmed. From Dow Jones: "The head of Japan's Upper House on Thursday suggested closing financial markets due to turmoil over the country's disasters, Kyodo News Service reported, in a stark example of how the crises have rattled some of Japan's prominent figures. "Markets are volatile--is such a situation acceptable?" Takeo Nishioka was quoted as telling a news conference. "Closing markets would be an option."" An option which alas would do nothing to mitigate fear, and courtesy of electronic futures markets around the world which can not be stopped save a global bank holiday, which would promptly be needed to "enforce" stability, not to mention FX or bond markets. Which is why expect to see ongoing swings of 10% in the Nikkei as everything is done to prevent further routs, up to an including the injection of further tens of trillion in taxpayer capital by the BOJ.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 17/03/11

With so much going on in the geopolitical/logical arena, it is easy to forget that there is an actual underlying economy which the Fed in its endless efforts to hike the Russell 2000 is doing all it can to destroy. Earlier we pointed out, when we looked at the PPI number, that the finished consumer food inflation index surged by the highest percentage in 37 years. This fact bears repeating. So we leave it to John Lohman to summarize briefly and succinctly as he is wont to do, how Americans will soon have no choice but to indeed eat their iPad 2 as soon as Benny unleashes QE3, which is now inevitable, or sooner.