Archive - Oct 29, 2012 - Story

The good news is that no workers are trapped. The bad news is that between the 14th Street transformer explosion and the flooding and damage elsewhere, there are 670,000 people without power and over 230,000 of them are in Manhattan.

*CON ED SAYS UNDERGROUND SUBSTATIONS COULD BE UP IN 3 TO 4 DAYS
*CON ED SAYS IT WILL TAKE LONGER TO REPAIR ABOVE GROUND STATIONS
*CON ED SAYS IT COULD BE UP TO A WEEK FOR POWER RESTORATION
*LARGEST STORM RELATED OUTAGE IN CON ED HISTORY, MIKSAD SAYS

It seems the market - or the collection of pre-programmed heuristic biases that make up the equity investing public (and machines) - is slowly but surely realizing the confidence trick that is the Fed's Quantitative Easing programs. The following chart should clarify - to anyone placing their gambling chips on the hopes of another round of easing from the Fed - why the game is up. To wit, the reverse geometric progression of S&P 500 performance during each Fed action: QE1 +50%, QE2 +30%, Twist +18%, QE3 & Twist +8%... so QE4 +4%, QE5 +2%, and QE6 +1%...

As a reminder, the biggest catastrophe that resulted from last year's Tohoku earthquake in Japan was not the earthquake itself, nor the infrastructure destruction from the susbequent tsunami, but the impact of the soaring water wall on the nuclear power plants in the coastline, namely Fukushima, and its aftermath, by now known all too well to all. So tonight too, all along the east coast, the biggest threat is not the wind, nor the rain, but the impact of the storm surge on the tens of nuclear power plants located in the vicinity of the rapidly rising tide. Such as Oyster Creek in New Jersey which just went on alert due to the surging water level.

Moments ago the Emergency Services were hit with the following disturbing update:

NYC | MANHATTAN | EXPLOSION | FDR DR & E-14 STREET | U/D CMD RPTS EXPLOSION AT THE CON ED PLANT. MULTI-RESCUES UNDERWAY | UEA01

See it happen in real time: fast forward to 3:10 in the clip below to see an underwater power station explode.

Once the surge levees break, the water level just soars and covers everything in a "reverse Titanic" as the following pictures demonstrate:

Plenty of talk has gone into the rising income inequality that America has experienced since the early 1970s. But income is merely a wealth flow, and the truer measure of equality is the distribution of net worth and financial wealth (the wealth stock). The historical change is clear: the bottom 80% have gotten considerably poorer both in financial wealth and in terms of total net worth.

With the unlimited asset purchase announcements by the Fed and ECB recently, the limits of balance sheet expansion will be put to the test. The current levels would have been seen as inconceivable a mere few years ago and now it seems business-as-usual as investors have become heuristically biased away from the remarkable growth. The problem is - central banks are missing inflation targets and credit growth is still declining - need moar easing, forget the consequences.

As we warned earlier - due to the flooding from the storm surge - ConEd has cut power to parts of lower Manhattan:

• *CON EDISON CUT POWER TO PARTS OF LOWER MANHATTAN, SPOKESMAN SAY
• *CON EDISON CUT POWER EAST OF BROADWAY, SOUTH OF WALL ST TO TIP
• *POWER CUT BETWEEN WALL, FRANKFORT, WILLIAMS & EAST RIVER :ED US
• *CON EDISON CUT POWER TO PROTECT LINES FROM HURRICANE FLOODING

'Dark Pools' comes to mind as the financial district is blacked out.

Update: good news: the storm surge is now receding. The water level has to decline by 2-3 feet for the flooding to subside.

Curious how many feet of water the rats in downtown NYC are under right now? The real-time answer is available after the jump below, courtesy of the NOAA and this tide height tracker at New York's Battery.

Nature came, saw, and showed the city that never sleeps and those for whom money is no object in exchange for a penthouse apartment in the very same building, what a true "master of the universe" is. The actual crane collapse clip below...

While hardly the biggest priority for NYC at this time, where rats in downtown New York of all varieties are doing their best to scramble away from the flood and get to higher territory, futures have just resumed trading for the overnight session, only to close before the average retail investor can buy or sell tomorrow at 9:15 am. The first trades indicate a resumption of this morning's weakness, but keep the 1400 support area in mind: if solidly taken out this may be Waterloo for the Fed for this year. And while normally we would expect the futures to get a NY Fed-assisted ramp that would make the TSX last second surge seems like a joke, the just released news from AAPL could well shake the bulls out of their trance, and finally force the world's biggest hedge fund hotel (230 hedge funds long) to puke and take the entire market with it. As we post, S&P 500 futures are sliding to 1397.5 (down over 10 points) - in line with where we noted they would trade at today's 'pretend' market close.

It doesn’t matter how abundant liquid fossil fuels might be; it’s their cost that impacts the economy. Many people think “peak oil” is about the world is “running out of oil." Actually, “peak oil” is about the world running out of cheap, easy-to-get oil. That means fossil fuels might be abundant (supply exceeds demand) for a time but still remain expensive.  We are trained to expect that anything that is abundant will be cheap, but energy is a special case: it can be abundant but costly, because it’s become costly to produce. EROEI (energy returned on energy invested) helps illuminate this point.

If Apple needed the best possible cover to announce that both mini-Steve Jobs and its head of retail strategy are leaving the firm, it got it courtesy of Frankenstorm and a market that will be closed for at least another 24 hours. We are looking forward to the analyst spin on this. As the head of the firm's iOS development (Scott Forstall) and the head of the firm's retail division (John Browett - a 5-month veteran!) have left the firm. Full bullish statement on the bright future of the company below but one can't help but feel like the guy responsible for the Maps fiasco just got thrown under the bus; and if the stores are doing so well, why is the head of retail out on his ear? Apple was already trading down around 0.65% in European trading this morning pre-announcement- this surely cannot help.

Presented with no comment... because what is there to say really!!!

As meteorologists have been repeating all day, the biggest threat for NYC is not so much the rain, or even the wind, dangling cranes hundreds of feet above ground notwithstanding, but the storm surge. The threat here is that Hurricane Sandy will hit land just as the tide comes in, resulting in a double whammy which Wunderground has called a "gigantic bulge of water that will raise waters levels to the highest storm tides ever seen in over a century of record keeping." Add to this the impact of the full moon, which means that high tide will be 5% higher than average for the month, and Wunderground's conclusion is inevitable: "This is a higher destructive potential than any hurricane observed since 1969, including Category 5 storms like Katrina, Rita, Wilma, Camille, and Andrew." How high are we talking: Sandy's storm surge will be capable of overtopping the flood walls in Manhattan, which are only five feet above mean sea level... According to the latest storm surge forecast for NYC from NHC, Sandy's storm surge is expected to be 10 - 12' above MLLW. Since a storm tide of 10.5' is needed to flood the subway system, it appears likely that portions of the NYC subway system will flood." Luckily for all, the NY Fed's tungsten gold, which is 50 feet below sea level (and 80 feet below the surface) and is in the Zone C flood evacuation area, will be perfectly "safe." And after all tungsten gold will never just float away.