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Will The Japanese Earthquake Be The Straw That Breaks Europe's Back?
Two months ago many were scratching their heads when Japan announced it was buying Eurozone bonds. After all - why would Europe want to have a marginal buyer (or as the case may be seller) of its debt be the country that is known by all to be the most indebted entity in the world? Of course, it became promptly clear that it was not the Japanese government doing the buying, but mostly its financial companies, with an emphasis on its insurance and reinsurance companies. Fast forward to today when Japanese insurance companies are getting pummeled in local trading on concerns the payoffs to the decimated Japanese infrastructure will be unprecedented. So what will happen? Why a scramble for liquidity of course, just like we saw back in September 2008, when cash stricken companies sold all their liquid assets first, resulting in a toxic loop of self-fulfilling prophecy selling which almost tobbled the $25 trillion shadow banking system. And what will said Japanese insurance companies sell first? Why the very same Eurozone bonds they acquired with so much pomp and circumstance, by the minions of the insolvent Eurozone, back in January of course. Furthermore, now that Japan will have no choice but to launch a mini round of Quantitative Easing and flood the market with JGBs, there will be a dramatic spike in supply for sovereign paper, which of course means yields across the board will rise.
Which begs the question: if an earthquake flips its wings in Japan, does the Eurozone go bankrupt, especially in the month when its most insolvent countries face billions in debt rollover requirements, tens of billions in maturity funding needs, even more in deficit funding requirements... and no cash?
h/t Geoffrey Batt
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Well, it was the Kobe quake that indirectly blew up Barings.
Leeson was financing his 88888 Account by shorting straddles on the Nikkei, and when Kobe hit, that was that....
Quack quack said the Black Swan...
Didn't see this one coming.
The BOJ will step aside in 7 days.
The Japanese people will not let this crisis go to waste. They will use it as an excuse, and justifiably so, to sell US treasuries to finance reconstruction an eventually default on it's 200% national debt.
Make preparations for this eventuality.
This is an example and warning to the USA when say California or other place has a natural disaster of the magnitude and we can't finance reconstruction. This is a major national security issue that needs to be dealt with.
"This is a major national security issue that needs to be dealt with."
Damn. You are right. Send in the army!!
Great movie with Ewan McGregor on that. 'Rogue Trader'
That funny. really. By that logic Tyler, US should be shut by the end of year as Japan will have to dump all its treasuries too?
Dude....
Actually that point was made in a front-page guest post a few weeks (months?) ago. That idea was more general, that Japan's demographic issue was bearish for Japan but even worse for the US, where our markets have become accustomed to a steady outflow of capital from Japan.
The general idea of a capital flow reversal causing upheaval in the US markets can be extended to this particular situation, albeit in a shorter-term context.
Besides, with either QE3 or NotQE3 on the horizon, what made you thing the US wouldn't be shut by the end of the year, anyway? ;-)
I didnt read anything there about Japanese Insurance companies being net buyers or sellers of UST over the last 6 mo.Do you not understand the coorelation with liquidity concers in the wake of insurance damages, and what they will likely sell first?
Did you read the piece, or just crap on yourself?
Try again.
No need to worry. This is a green shoot. Think of all the infrastucture and products that will need to be bought. These major events are good for the markets as you can see the markets have rallied and are UP! BEnron is very happy this morning. The focus is off of him AND the markets can finally rally.
Oh, and the earth just EFFFFING SHIFTED ITS AXIS 4 INCHES!!!!! Another Green SHOOT!
http://fiatsfire.blogspot.com/2011/03/massive-earthquake-hits-japan-decl...
My company is probably already thinking of ways to increase our construction machinery sales into Japan.
Tora! Tora! Tora!
Black swan sunami! Great name for a band or global destruction.
Must read
Planets and Earthquakes...
http://seenoevilspeaknoevilhearnoevil.blogspot.com/2011/03/planets-and-earthquakes.html
Bye Bye Cheap Food....
http://www.blogger.com/posts.g?blogID=7964465388607830029
Safest quadrant on our planet...
Canada's four Western Provinces w/ a plethora of natural resources and only 12.5 million citizens...
http://seenoevilspeaknoevilhearnoevil.blogspot.com/2011/02/vancouver-bcworlds-most-liveable-cities.html
Does anyone think the Super Full Moon has anything to do with this?
China already has plans for a takeover of Canada's four Western Provinces.
A Tsunami of Sushi, playing your favorite Techno dance music, Wednesday's and Friday's. Also, streamed on zerohedge.com.
Today will mark the end of Japans Deflation Era.....Rebuilding Infrastructure will make Japan the most modern economy
the entire country was not leveled just one or two cities got flooded. lets not get carried away..this will not mark the end of deflation. did katrina hiting new orleans jump start the infistructure of the US....? no
Plus as well they already have a pretty good infrastructure, bullet trains, they've built bridges to everywhere, got nuke power....
Black swan contagion?
Oh... you mean Volatility isn't just something we short into oblivion without risk of loss? :)
Black swans are something that's right in front of you and you realize it after it all falls apart.
This is a disaster and unexpected.
How many global issues can be up in the air? Why should stocks surge anymore?
Japan is going into recession for sure now
It looks like there is a whole flock of Black Swans flying around right now.
We covered this a month or so ago I think we all came to the consensus to call it the aflockalypse.
aparently it is good for stock markets....After the mankind is wiped out, the HFT robots will push the dow jones to the 36000
Unexpected?
No, it was fully expected. So is "the big one" that will hit California in a few days.
So is the one that will level Mexico City. The one that will decimate Lisbon. The one that will obliterate Berlin. The one that will bury Ankara.
1) link please; 2) definition of "a few days"
he's jivin' you (sort of). fact is, anything could happen any given day. fact is, most major faults are "due" or over-due". that's a fact. we just cross our fingers and go merrily on our ways..... WTF else ya gonna do?
you forgot the New Madrid that will split USA in half & re-route the Mississippi. and the one in New York....
Ben will print the money and backdoor it to the Eurozone banks so they can buy Eurozone country bonds.
Hell, maybe the Eurozone banks can even get in on the "flip that bond" action so American taxpayers can help recapitalize them too.
Nothing to see here. Move along.
Why isn't gold going to the fucking moon!?
Because right now people are selling their "paper gold" in order to cover losses in their other paper products.
the manipulation is either off the charts..or the idiot Hedge Funds are running to the so called safety of dollar and US Treasuries....these guys will blow themselves up sooner or later trying to pick up nickels on the trade..cant be any shorter term thinking than these guys.....
thats what i was thinking....
NAI out with a new piece today. They've made some pretty good calls lately. Comparative geniuses, really, compared to CNBC favorite BSer's Dennis "I'm short of gold" Fartman & Dougie "all my 2010 predictions were wrong" Kass.
=====
March 11, 2011
U.S. Dollar Collapse Could Occur at Any Time
http://inflation.us/dollarcollapseanytime.html
If today is not a risk off day between the tsunami, yesterdays dma breach, elevated oil going into a weekend of unknowns in the Middle East I do not know what is.
Makes you question QE 3 if the Japanese are no longer buying Treasuries.
QE3 is a done deal, just like QE4ever is already sealed.
It's just a question of whether or not they stack them up back to back or allow for some deflationary pain between issuances.
There will be QE regardless.
If they want to avoid diminishing returns as much as possible, they'll stuff deflationary pain in between...
so far, the tape suggests you don't know...
$INDU breaking the 50 DMA this morning.
All 3 indices have broken that support... This is playing out picture perfectly... After its top a couple weeks back - we got very choppy action right above support... No a break below support... I expect some more choppy action below these support levels before another leg down within the next couple weeks.
Interesting note - markets pressured this morning down around -.4% right now... bonds flat. Not looking like much of a safe haven right now. And silver getting nailed. Everyone going to cash or what???
Everyone has debt, but no cash? Where is all the cash that has been raised by all the debt? In assests. Assest liquidation is coming and with it deflation. Equities, PM, bonds all up for sale?
You forget the excess liquidity held by the world plutocrats, estimated at 80 trillion USD stuffed in tax haven accounts...That money has to travel...like Q's sovereign funds...all sunk in Italy et al. Half of that 80-100 trillion is corporate money on shadow banking investments via HF. Pulling that back into US economy would be the kicker that Obama has up his sleeve by a Homeland investment act...M. Gross must be watching his liquid pile of dough ....wondering which way to go. He's hoping a USD surge and Euro meltdown.
The Japanese will sell some foreign assets, sure. The net effect will be more money printed out of thin air. Increased demand for commodities required to rebuild.
This is the event that will cause the Yen carry trade to snap. Back. Hard.
Because this is not even near over yet. + the Japanese were heavily invested in Oz and NZ, both hammered recently.
Japan on the edge, for sure.
ORI
http://aadivaahan.wordpress.com/2011/03/11/axis-trembles/
Still wondering how no Variable Annunity providers failed in 2008-09.
dollar and euro punching it out to see who goes down first. Looks like a Charlie Chaplin Tramp movie he made on a boxing match. If you ever saw it you wouldn't want to be in the place of the referee! A true classic that WB7 should re-animate for all of us in his wonderworld!
LOL
This is what happens when we live in the trailer park trash style that modern policy makers and economists have supported for decades. (read: living beyond means and having zero to negative net worth)Things work fine until you have unaccounted for massive problems... like a massive earth quake.
Did everyone see the big slug Larry Summers out saying that this could be a boost to Japanese GDP from rebuilding? What bull... I'm glad Fat Larry did the calculations of the loss of manpower due to an as of now unknown number of dead. (among a host of other issues that could crimp Japan aside for Debt to GDP ratio)
Vultures they are -- and misguided to say the least. Try rebuilding an infrastructure when commodoties are going through the roof, oil may be $ 200 a barrel soon, you live in an Island enviorment with all of those challenges, and many of the countries over there hate Japan's guts (see Koreas, and China). No - this sounds like a job for an unfunded US taxpayer to bail out, with money we dont have and borrow from China.
Miracles are achieved thanks to money you dont have...
Loss of manpower? Metro Tokyo must have a population of some 13 million people. I'm guessing 10,000 dead will be the final count.
My LARGER point within the post was to bring up just one of a list of other items that Japan has to deal while Larry Summers just comes out and says "all is well, GDP boost!" Do you need me to write out the list? (BTW- right now, those "only 10,000 dead" are very important to the people of Japan) PS- Thanks for the junk.
I was worried about Japan before. This isn't going to help things.
Power is out & nuclear plant isn't cooling down after shut off.
Godzilla can't be far away....
i heard Ultraman is on his way to kick the bernanks big butt!
That's a relief, because Mothra and Rodan are on their way too...Seems like the sunami woke them from their slumber
What ever happens, I hope they don't wheel out those midget twins with the squeaky voices!
The MoF cross border data refutes this hypothesis.... the evidence is to the contrary... most participants have been sellers of froreign bonds for a long tome now.
Will Japan still be able to buy U.S. treasuries??
Will Japan still be able to buy U.S. treasuries??
Bernanke will lend them the money, if necessary.
ask yourself how a 200% in debt bankrupt Japanese Govt can afford to buy debt from a steaming towards insolvency US Govt? ....are these absolute nutters in an asylum yet? ..if not why not???
I like that word
"Tobbled" almost like toppled and trouble combined!
i thought he might be enjoying some imported chocolate.
the greatest danger, now, seems to me to be the nuclear reactor. however, since these are always, without fail, 100% safe no matter where they are built, by whom, and, of course well-maintained, there should be no problem.
and, if there were, do you think anyone would be allowed to publish that info at this point?
here are some copy/pasties from my fuking around:
1) (C. Sci, Monitor): One oil refinery went up in flames about 40 miles outside Tokyo, 11 nuclear plants were shut down and a nuclear emergency was declared for one because its emergency cooling systems stopped working. Officials there say the situation is under control and there's no danger of fallout.
2) (Asia-Pacific on MSNBC): The plant, which is in Onahama city, about 170 miles northeast of Tokyo, experienced a mechanical failure in the backup power generation system to supply water needed to cool the reactor. The reactor core remains hot even after a shutdown... Meanwhile, an administrator at the Tohoku Electric Power Co's nearby Onagawa facility said the process for the cooling reactor is "not going as planned," adding that "nuclear emergency situation" has been declared. The company asked people nearby to stay calm, the official TV news channel NHK reported...Another plant at Onagawa, which is in the worst-hit Miyagi prefecture and further north from the Fukushima facility, also is experiencing a water leak, though it is unclear whether the incident is significant...Prime Minister Naoto Kan said: "Parts of nuclear plants were automatically shut down but we haven't confirmed any effects induced by radioactive materials outside the facilities."
3) (guardian.co.uk): Residents within a 2 mile (3km) radius of Tokyo Electric Power's (Tepco) Fukushima Daiichi nuclear plant had been told to evacuate, Japan's chief cabinet secretary, Yukio Edano, told a news conference. Kyodo news agency said around 3,000 residents were being moved out..."There is a falling trend (in water levels) but we have not confirmed an exposure of nuclear fuel rods," he said.
4) (alex jones' Infowars.com): Under Japanese law, authorities are mandated to issue a nuclear emergency if the cooling mechanisms fail, and they did exactly that for the first time in Japan’s history after it became clear that attempts to cool the reactor were “not going as planned”.
Fukushima No. 1 is one of the largest nuclear plants in the world and has eight separate units located on the site. Thankfully, so far there’s no evidence of any radioactive leakage.
slewie, again: now, as far as any economic impacts go, oncologists on the w. coast are ordering new Tesla Roadsters as i write, and 'hello, kitty' has tsunami-like real-time orders for its evening release: "Fuk-u-shima's Revenge".
I like that word
"Tobbled" almost like toppled and trouble combined!
.....And the markets are turning green! No POMO! No Shit! Truly the most amazing stock market I have ever seen. Looks like this baby is gonna stand on its own. No QE3.
Russell 2000 to a trillion.
AND THE VIX IS DOWN
Doesn't anyone in the trading pits notice a huge earthquake this morning???
I feel like I'm taking CRAZY PILLS.
http://www.youtube.com/watch?v=4DVAsmrwdtQ
MORE ODDNESS
The Other Deal: Lockheed Martin wanted to sell F-16 fighter jets to the Thai government but the Thai government didn't want to pay in cash, so it proposed paying with 80,000 tons of frozen chickens.
AND THE MILLION TONS OF SUGAR JPM TOOK DELIVERY
THEY ARE GETTING READY TO LAUNCH THE LIFEBOATS BEFORE THE ASTEROID HITS AND WE AREN'T INVITED. THAT'S WHAT IS CAUSING THE EARTHQUAKES. chicken and cake buffet for the elites watching us from ORBIT
Am I the only person who still remembers the Day of Rage in Saudi Arabia?
There's alot of shit going down..These things right here is where you have to watch the other hand...
yep cause nothing is happening there.
Crazymaking times indeed.
Looks like there are more than 2 hands to look out for anyways.
ORI
Let the Katla errupt!!!
Shadow bankings interlinked bets get whalloped again.
BTW, did Brian Sack look at the POMO schedule and say, "f*ck it, I'll just buy the indexes myself"?
What a nonsense. Just look at the euro. Euro is the new safe heaven. Eurozone will get its house in order by 2012-3 and then bye-bye dollar.
The only thing that pays the bills for Trichet's Super CDO is German manufacturing... I hope BMW and VW have currency hedges in place....
Margaret Brennan on Bloomberg just now - Inteviewing Bill Gross, "in light of the tsunami you still made it into the office today?" Bill responds "oh yes we are all at work today, we are well above the water line here in Newport and our Tokyo offices are open as well."
Let's see if Bloomberg edits out that part of the clip when it is posted
Where in Newport Beach is "well above the water line"???
i swear one of our guys called the earthquake last night before it happened!!!: http://www.hedgefundlive.com/blog/earthquakes-and-flash-crashes-the-coming-mini-flash-crash
must have eyes in the back of his head! Weird!
Miss Cleo?
Wasn't she working with Al Gore with that "voter's intent" bullshit?
It's the Piiglets. euro/yen support has been on the back of usd/jpy this week. eur/usd will trade sideways. GBP has me puzzled. Via the yen.
then there is the little matter of Euro dependence on Libyan crude with Ireland and of course Italy with more than +20% total imports shut off in the pipeline.
http://arthurzbygniew.blogspot.com/search?updated-min=2011-01-01T00%3A00...
We are not consuming the same amount of crude that we were doing back in 2007.
Outside of the multinational and farming sector the entire economy has collapsed.
I cannot get any decent up to date Irish energy stats but at a guess I imagine our petrol and diesel consumption has dropped 15 - 20% from its highs.
We have a truely massive trade surplus in Ireland now.
wow right after this article was posted the eur starts rocketing back on it's way to 1.39 vs usd after being down to 1.375 at 5am est.
Not looking too sideways to me.
Some say the great SF earthquake of 1906 started the chain of events that led to the Panic of 1907.
well.... "it's different this time" (ha!). seriously, back in ought-7, no Fed (matter of fact, I think it was '07 that "justified" the Fed). also - proportional degrees of damage to consider
I think it is a warning sign the US dollar must rallying now, what is going on in the background, Aug is back over $35, do you think a panic soon, I guess, is the next shock USD, and then fireworks start and then WAR?
"Will The Japanese Earthquake Be The Straw That Breaks Europe's Back?"
No
...Europe will be going bankrupt in its own time thank you... i reckon we've 1-2 months for the major European stock indexes to collapse into the toilet, the PIIGS are already on their way... then the Eurozone economies follow 2nd half of 2011... between 2012-14 it'll be nothing but carnage and the parasitical EU and Eurozone Govts falling apart at the seems as the peoples finally kick off against this scum... the fireworks and toys being thrown out of the political prams should be a sight to behold (and i'm going to fuking love it;)
Should I be going gold or wait for the dip? Will gold fall as liquidation begins, or will it rise as a sign of capital fleeing to safety?
Mach - Gold has had a mighty good run. I think this is the last run-up started today to maybe $1,500 (maybe Sinclairs $1,650), so up to you wether you join in. And yes if the deflationary epocalipse takes hold and liquidation begins Gold and all Commodities get hammered, as per 2008-09
You sound like you belong in a pram... permanently...
So, is it a good time to buy Portuguese bonds and gold?
Try bacalao its safer.
As soon as I heard that the nuclear reactors were safe, I looked at my dog Trooper in disbelief. This registered with him. As if anyone would be allowed to report that those facilities could wreak havoc on generations! Just like the Gulf Coast is back to normal after an unnatural disaster. Eat your seafood. Ignore those dispersants. Shop.