Summary Update Of Japan's Nuclear Crisis - Last Ditch Attempt To Cool Reactor 4 Involves Police And A Water CannonSubmitted by Tyler Durden on 03/16/2011 06:13 -0500
- A helicopter was unable to drop water to cool the No.3 reactor at the quake-damaged Fukushima Daiichi nuclear power complex in northeastern Japan probably because of the high radiation, Kyodo news agency said, quoting the defence minister.
- Police will attempt to cool No.4 reactor's spent nuclear fuel pool using a water cannon, TV says.
- Japan's top government spokesman says radiation levels around the complex are not at levels to cause an immediate health risk.
- There is no evidence of a significant spread of radiation from Japan's crippled nuclear plants, the World Health Organisation says.
- Operator says it is unable to resume work cooling the reactors due to radiation risk. Workers ordered to leave the plant were allowed back in after radiation levels fall. Operator says there were 180 workers on site as of 0230 GMT.
- Operator of the nuclear power complex in northeastern Japan recorded the site's highest levels of radiation at the No.3 reactor on Wednesday.
- Water is being poured into reactors No.5 and No.6 at the plant, the operating company says. Those two reactors had been shut down for scheduled maintenance.
It is not yet clear how devastating the nuclear-reactor damage will prove to be, but the situation appears to be worsening. What is clear is that the potential crisis in the Persian Gulf, the loss of nuclear reactors and the rising radiation levels will undermine the confidence of the Japanese. Beyond the human toll, these reactors were Japan’s hedge against an unpredictable world. They gave it control of a substantial amount of its energy production. Even if the Japanese still had to import coal and oil, there at least a part of their energy structure was largely under their own control and secure. Japan’s nuclear power sector seemed invulnerable, which no other part of its energy infrastructure was. For Japan, a country that went to war with the United States over energy in 1941 and was devastated as a result, this was no small thing. Japan had a safety net. The safety net was psychological as much as anything. The destruction of a series of nuclear reactors not only creates energy shortages and fear of radiation; it also drives home the profound and very real vulnerability underlying all of Japan’s success. Japan does not control the source of its oil, it does not control the sea lanes over which coal and other minerals travel, and it cannot be certain that its nuclear reactors will not suddenly be destroyed. To the extent that economics and politics are psychological, this is a huge blow. Japan lives in constant danger, both from nature and from geopolitics. What the earthquake drove home was just how profound and how dangerous Japan’s world is. It is difficult to imagine another industrial economy as inherently insecure as Japan’s. The earthquake will impose many economic constraints on Japan that will significantly complicate its emergence from its post-boom economy, but one important question is the impact on the political system.
Japan is back in recession. The incoming tide just brought in 2,000 bodies. Most major companies, including Toyota, Nissan, Honda, and Sony have shut down all domestic production. Tokyo’s subway system is closed, stranding 25 million residents there. Electric power shortages are a huge problem. Half the country’s nuclear generating capacity is now down. 20,000 expatriates waiting at Tokyo’s Narita airport as foreign companies evacuate staff to avoid a nuclear meltdown. $187 billion worth of credit intervention to “save Japan.”
The Nikkei 225 plummeted to its lowest point in two years as the damage due to Japan’s recent earthquake became realized. The Bank of Japan injected ¥15T ($183B) into money markets this morning to maintain financial stability within Japan’s economy, while boosting asset purchasing capability to ¥40T from ¥35T to head off a likely decline in business sentiment. Reports put Japan’s insured earthquake losses at $14.5-35B, excluding tsunami-related losses. As a leading global consumer, Japan’s weakened state will likely affect commodity prices and its main trade partners. Although Australia’s second largest export market is Japan, the Australian press reported that its companies are not exposed to Japan’s recent disaster.
The massive earthquake and tsunami that has rocked Japan is being digested by markets and the economic ramifications and uncertainty is leading to risk aversion. Tokyo gold futures rose on the news with the most active gold contract on the Tokyo Commodity Exchange, February 2012 inching 0.22% higher to 118,000 yen prior to giving up those gains. Gold is marginally lower in dollars but higher in euros, Swiss francs and British pounds. After the falls on Wall Street yesterday the Nikkei was already under pressure when news of the quake broke at the end of the trading day. The Nikkei fell 1.7% today and is down over 4.11% for the week. The Japanese yen was sold in the immediate aftermath of the quake. Counter-intuitively it then recovered and is the strongest currency in the world today (see table). Market participants appear to be seriously underestimating the risk posed by the megaquake to the Japanese economy and assets. Alternatively, there may have been intervention by the Japanese authorities in order to maintain confidence and protect the value of their currency and bonds. The Bank of Japan, like the Federal Reserve, regularly intervenes in foreign exchange markets and has even intervened in equity markets by buying ETFs linked to the Nikkei and the Topix. Considering the sharp selloff seen in equity markets in recent days, gold’s resilience is impressive. Gold is down nearly 1% for the week and a lower weekly close could see the short term momentum change and a period of correction and consolidation.
A snapshot summary of the immediately known geopolitical and financial consequences of the Japanese earthquake per Reuters
Reader Nick Ricciardi submits a rather controversial view on the future of Japan: "Over the past few weeks there has been a new round of articles and commentaries predicting doom for Japan’s economy. Yet, as usual, Japan’s bond markets have shrugged off these fears. Japan’s capital markets and its macro-economy are replete with confounding puzzles. But they are all rooted in two basic misconceptions that Japanese hold concerning their debt. Moreover they are understandable if analyzed from a perspective of both the public and private sectors. Doing so gives us insight into why Japan’s public debt offers the lowest yields of any nation when its debt/GDP ratio is the highest, why Japan’s corporate credit spreads are so narrow and its yield curve almost flat, why Japan’s bond prices are less volatile than those of other industrialized nations when its economy and stock market is “leveraged” to global growth, and why the yen tends to strengthen when Japan’s economy turns down."
So, let's see which of the things we've been ignoring suddenly matter today...
Yves & Tom of Naked Capitalism continue to blame those who shorted housing and housing-derivatives for driving the demand for the structured credit derivatives that almost ruined the financial system. That's like blaming the U.S. for the acts of Nazi Germany during WWII: It's just doesn't make any sense.
Why wouldn't the average Japanese person, who is in the exact same boat, enjoy falling prices, too?
Well, as it turns out, they do! Though wages and asset prices have stagnated in Japan for decades now, the quality of life for the average Japanese has not massively deteriorated in the way you'd think if you blindly accepted what the Western media tell you. Sure, Japan has huge problems. The rapidly aging and shrinking population, a lack of political willingness to reform, and a huge government debt burden all pose enormous challenges. But, as far as I can see, what's usually portrayed as the biggest problem of all in Japan, deflation, only really hurts the government. And that's only because the "real" value of all the hundreds of trillions of yen that it owes (mostly to its own citizens) goes up every year.
Uncle Pap Wants You! Greece Reaches Peak Desperation As It Tries To Sell "Diaspora Bonds" To Delay BankruptcySubmitted by Tyler Durden on 03/09/2011 10:28 -0500
Just because Greece is now terminally locked out from regular capital markets, with its CDS trading points upfront, doesn't mean the country can't drink from the same Hopium trough as every other US investor. According to Reuters: "Greece has filed a shelf registration with securities regulators in the United States to be able to sell so-called diaspora bonds to retail investors, the head of the country's debt agency said on Wednesday." In other words, Uncle Pap wants YOU to bail out the country that even the ECB appears to have given up on. And if not for G-Pap, do it for Angela: because if the euro falls apart, the the DEM returns, how will Germany export its way in a non-eurozone environment, if the fair value of Germany's currency is realized and exports plunge? And to all US citizens who are jealous they are not the target source of funds for this last ditch attempt to stave off bankruptcy (again) fear not: pretty soon (if Uncle Bill is correct), Uncle TurboTax will give the very same opportunity to all 300+ million US hopium addicts.
Two top ECB officials indicated yesterday that interest rate increases might come sooner than ECB Trichet alluded to last week. Given Europe’s slow economic recovery, opinions are mixed on the matter. Recession-predicting economist Nouriel Roubini told reporters yesterday that if oil reaches $140/barrel, a level seen in the summer of 2008, the rate action will cause many advanced economies to slip into double-dip recession. Recent turmoil in the Middle East has sent oil prices nearing $120/barrel. Greek, Spanish, and Portuguese yields rose again yesterday as Friday’s EU summit on a new debt crisis solution draws closer. Portugal sold €1.0B in 2Y bonds at 5.993% v 4.086% prior with b/c 1.6x v 1.9x prior. The SOVXWE widened out again to 183bp from 177bp a week ago with Spain underperforming as it is most vulnerable to rate hikes. We feel that the longer the periphery/core support process drags out, the more rating agencies will be forced to look at interest rate burdens for periphery countries as being normal moving forward. German industrial production rose 1.8% MoM v 1.7%E. Greek unemployment for December moved up to 14.8% v 14.5%E and 13.9% prior. U.K.’s visible trade balance for January strengthened to -£7.1B v -£8.5B E, its smallest deficit since April of last year. The figures show an improvement over December’s -£9.7B even after considering weather’s impact on exports that month.
Oaktree's Howard Marks has just released his "year in review" letter, which like any letter by Marks is a must read, as the Oaktree manager has proven his presence in the pantheon of asset managers is well-deserved. Not surprising, and as we had repeatedly highlighted, when we pointed out the near record implied correlation between all asset classes, 2010 was a year of "correlations" which we believe may be just as appropriate a word to describe last year's market as "austerity" (which has so far completely missed the US). Quote Marks: "The word for 2010 was “correlation,” meaning macro trends dominated performance within asset classes. Thus most securities performed in line with their market benchmarks and the returns to security selection were limited. It wasn’t easy to outperform benchmarks."All this and much more on the firm's performance below.
The macro picture and market reactions became more complex last week. On one hand global activity and hence demand remain solid. Last week’s global PMIs have been very strong and now stand at exceptionally high levels with a few exceptions. The US labour market continues to perform strongly. But on the other hand, Oil prices continue to be the main focus, as market participants continue to debate the risks for supply disruptions. The sudden shift to a much more hawkish stance by the ECB highlights that inflation targeting central banks may have to act to keep inflation expectations anchored...In a relatively data-light week, the main focus will therefore be on policy developments again. First, the instabilities in the MENA region will remain key, with heightened focus on potential demonstrations in Saudi Arabia on Friday, March 11. The second political development is the intensification of Eurozone sovereign negotiations ahead of the “grand bargain” summit on March 24/25. Finally, the US budget negotiations remain a critical issue and there are some tentative signs that the policy consensus shifts slightly towards more frontloaded fiscal tightening. Bond issuance will be focus point in that context. The US is scheduled to issue $66bn worth of Treasuries in maturities ranging from 3-30 years. Portugal will tap the market with a small issuance despite the fact that last week the national railway company failed to raise government guaranteed debt. Merkel and Schaeuble are scheduled to speak towards the end of the week ahead of important regional elections in Germany. On Friday, Eurogroup leaders meet for another summit, trying to agree on measures to finally put the sovereign crisis behind.
Everyone wants to know how the Central State can "help" small businesses so they will start hiring again. The answer is simple: fix the structural imbalances in the U.S. economy and start favoring real production over financial speculation. Please note the question at hand is "what should be done," not "what can be done politically." Politically, everything I propose here is impossible. The Status Quo's stupendous power and share of the national wealth is based on preserving those structural imbalances. The last thing the toadies and parasites in Washington want is to upend the structural imbalances which feed their Masters, the Financial Power Elites and crony-Capitalist cartels.