Japan's Nikkei 225 Overtakes Dow For First Time In 3 Years

Tyler Durden — Mon, 20 May 2013 04:25:45 +0000

Following an 80% rise off October 2012 lows, Japan's Nikkei 225 nominal price just exceeded that of the Dow Jones Industrial Average for the first time since May 6th 2010. Though the Dow is around 8% above its 2007 all-time highs, the Nikkei remains 16% below its 2007 highs (and over 60% below its 1989 all-time highs). While the Dow is pushing its P/E towards 15x, the Nikkei just passed 28x - quite a 'valuation' difference. JGB futures - though not halted yet - are plunging notably (with JGB yields up 3-4bps). The last time the Nikkei was here a USD bought 95 JPY, now it buys 103... and 10Y Japanese government bonds yielded 1.29% against today's 86bps (compared to 10Y Treasuries 3.5% then and 1.96% now) ... In those three years the Fed has expanded its balance sheet by just over $1 trillion and the BoJ by about $400 billion equivalent.

and JGB Futures are plunging...

Charts: Bloomberg

White House Damage Control Script Jeopardized By New Disclosures

Tyler Durden — Mon, 20 May 2013 01:51:32 +0000

It has been a tough weekend for the President. First, the CEO of the Associated Press states the government's seizure of AP phone records was "so broad and so secret," among other factors, "that it was an unconstitutional act," adding that it had already had a chilling effect on newsgathering and press freedom...

Add to that James Goodale's comments (the leading force behind the release of the Pentagon Papers and first amendment lawyer), that President Obama is "worse for press freedom than Nixon" and things are not going well...

But, the problems did not stop there as the Wall Street Journal reports that while President Obama claims not to have been made aware of the IRS indiscretions until May 10th it seems the White House's chief lawyer learned weeks ago that an audit of the IRS likely would show that agency employees inappropriately targeted conservative groups.

Via The Wall Street Journal,

...

In the week of April 22, the Office of the White House Counsel and its head, Kathryn Ruemmler, were told by Treasury Department attorneys that an inspector general's report was nearing completion, the White House official said. In that conversation, Ms. Ruemmler learned that "a small number of line IRS employees had improperly scrutinized certain…organizations by using words like 'tea party' and 'patriot,' " the official said.

...

The White House, which declined to make Ms. Ruemmler available for comment Sunday, wouldn't say whether she shared the information with anyone else in the senior administration staff.

...

When findings are so potentially damaging, the president should immediately be informed, said Lanny Davis, who served as a special counsel to President Bill Clinton.

Of the controversies dogging Mr. Obama, including the terrorist assault in Benghazi, Libya, and the Justice Department's seizure of phone records of Associated Press journalists, the IRS case "is the most nuclear issue of all," Mr. Davis said. It involves the "misuse of the IRS" and "anyone who knew about this a few weeks ago and didn't tell the president shouldn't be in the White House,"

...

Republican lawmakers on House oversight committees are pressing the investigation, with more hearings set for this week.

"Exactly who in the administration knew what about the IRS targeting is one of the key outstanding questions," said Rep. Darrell Issa

...

"... President Obama and his administration seem more preoccupied with having deniability than quickly addressing serious wrongdoing..."

The President's response so far is that "we’re not going to participate in is a partisan fishing expedition."

The 'Other' Way To Exit The Euro...

Tyler Durden — Mon, 20 May 2013 01:30:23 +0000

With unemployment rates running at all-time record highs across the peripheral European nations and the rise of nationalist (some might say extremist) parties, it remains somewhat surprising that there has not been greater social unrest (yet). The people of Europe are caught in a hinterland of knowing what is best in the long-run but fearing the short-term band-aid ripping pain of exiting the political farce known as the European Union. But some have found a way... There is another way to 'exit' on personal terms from the austerity and pain induced by a centrally planned overlord. Immigration to Germany from Italy, Spain, Greece, and Portugal has 'never' been higher... leaving us wondering - at what point does the free and open exchange of everything in the union gets its share of 'protectionism' from an over-stuffed Germany freezing the import of labor? So it seems that not only is the money (deposits) finding a new home but the people too are moving to where the money is..

Central Banks to Dominate the Forces of Movement in the Week Ahead

Marc To Market — Mon, 20 May 2013 01:00:38 +0000

The most important force that has lifted the US dollar across the board is the sense, encouraged by official comments, of the potential divergence in the trajectory of monetary policy between the US and most of the other major high income countries.

In particular, the pendulum of market psychology has swung back toward speculation of tapering off of QE-related asset purchases by the Federal Reserve. At the same time, ECB officials continue to indicate they are carefully considering a negative deposit rate. Many still expect the Bank of England to resume its gilt purchases program and new initiatives on its forward guidance in Q3 after Carney takes the helm.

Meanwhile, Carney and the Bank of Canada continue to push further out when they anticipate full capacity will be reached and when it will remove some accommodation by increasing interest rates. The recent string of economic data, including prices, has been generally softer than expected and the forward guidance the central bank has offered is becoming less credible. Additional easing by the Reserve Bank of Australia, though the recent sharp drop in the Australian dollar appears to tempering expectations of a rate cut as early as next month.

Japan’s quantitative and qualitative easing is not even two months old. It is far too early to suggest a reassessment, though Q4 12 GDP was revised up and Q1 13 GDP came in stronger than expected and may be revised after Japan releases the latest capex figures in early June. Capital investment was an unexpected drag on Q1 GDP and may be adjusted higher.

Although there are several important pieces of economic data in the days ahead, including UK inflation and retail sales reports, euro area flash PMI readings, German IFO, Japan’s latest trade figures, US durable goods orders, the focus is on the central banks.

The Fed’s Dudley and Bollard speak on Tuesday, but the real interest is on Bernanke’s testimony on the economic outlook on Wednesday. Comments by regional Fed presidents who do not vote this year on the FOMC has helped fan speculation of tapering off of Fed purchases in Q3. Bernanke is likely to reiterate that the Fed is vigilantly watching the impact of QE on the financial markets and risk-taking generally. However suspect it is too early for Bernanke to signal a shift in the pace of QE. Not only has the full impact of the fiscal tightening this year not yet been fully transmitted, but also the decline in core inflation readings suggests no strong urgency to alter the pace of the asset purchases.

There are at least eight ECB officials that speak in the coming days, including Draghi and Weidmann on Thursday. The official line is that the ECB is technically prepared to adopt a negative deposit rate, and there were rumors last week that it had contacted at least one bank to discuss.

Most analyses seem to focus on the potential unintended consequences. More problematic, we suspect are the unforeseeable consequences to financial disintermediaries of policies that frankly have not been tried by other major central banks. In addition, shrinking margins and attempts to secure deposits may become more challenging, for example, and could lead to new borrowing from the ECB or ELA (emergency lending assistance).

Moreover, the intended benefits—to bolster lending, especially to small and medium size businesses-- may be elusive in the face of soft demand and recessionary conditions in much of the euro area, including several core countries. We expected that when the cost/benefits have been analyzed, the ECB will decide to refrain from pushing the deposit rate below zero.

The BOJ is the only major central bank meeting this week. Its two day meeting concludes Tuesday. For the most part BOJ Governor Kuroda must be fairly pleased. The growth is sufficient that the BOJ is likely to revise up its assessment of the economy. Inflation expectations, as revealed in the break-even rates of its inflation linked bonds have increased. The yen has weakened and the Nikkei has rallied. International resistance has been quite modest despite the traditional and social media playing up the “currency war” metaphor.

The main problem has been the Japanese government bond market. The increase in yields seems considerably earlier and more dramatic than officials anticipated. The marked increase in volatility is poses a significant threat to some market segments whose investment strategies that are particularly sensitive to shifts in value-at-risk models.

Just like the low vol environment encouraged investors such as banks and leveraged accounts to trade large size, the increase in volatility is forcing them to reduce exposures. This aggravates the lack of liquidity and tends to reinforce the increase in volatility. The BOJ has already tried to alter is asset purchases, making smaller and more frequent transactions.

Officials may steps up their verbal assurances and large scale injections of short-term liquidity did help stabilize the JGB market at the end of last week. Economic Minister Amari's comment that the yen's weakness has been corrected and additional weakness may be counter-productive, suggests heightened concern about the bond market.

Minutes from the recent Reserve Bank of Australia’s meeting that resulted in a 25 bp rate cut will be released. We look for the minutes to reiterate the statement issued after the rate cut. Previously, the RBA had identified scope to ease and they used part of that scope. This still leaves the door open to additional rate cuts. Concerns about the impact of the strength of the Australian dollar may seem a bit dated given the recent slide in the Australian dollar, though by most measures, it remains significantly over-valued.

The BOE publishes minutes from the recent MPC meeting on Wednesday. The minutes will likely echo the sentiments of the latest quarterly inflation report in which the BOE shaved its inflation forecast and lifted its growth forecast. In April, three MPC members, including the governor, voted to resume gilt purchases. They have failed to persuade a majority. With stronger economic data and the proximity of Carney’s ascension, it will be interesting to see if there were defections from the minority.

At the BOJ, Kuroda was able to secure a majority in favor of new and more aggressive quantitative easing, even though some similar measures had been previously rejected by the same board. The Bank of England is horse of a different color. The thinking seems to be more independent. Critics have harangued about Governor King’s management style, but he is a rare species of central bank heads that has allow himself to be outvoted on several occasions. Carney may find it more difficult than Kuroda in bending the central bank's monetary policy to his will.

Is EVERY Market Rigged?

George Washington — Mon, 20 May 2013 00:38:41 +0000

CNN reports:

The European Commission raided the offices of Shell, BP and Norway’s Statoil this week as part of an investigation into suspected attempts to manipulate global oil prices spanning more than a decade.

None of the companies have been accused of wrongdoing, but the controversy has brought back memories of the Libor rate-rigging scandal that rocked the financial world last year.

***

A review ordered by the British government last year in the wake of the Libor revelations cited “clear” parallels between the work of the oil-price-reporting agencies and Libor.

“[T]hey are both widely used benchmarks that are compiled by private organizations and that are subject to minimal regulation and oversight by regulatory authorities,” the review, led by former financial regulator Martin Wheatley, said in August . “To that extent they are also likely to be vulnerable to similar issues with regards to the motivation and opportunity for manipulation and distortion.”

***

In a report issued in October, the International Organization of Securities Commissions — an association of regulators — said the ability “to selectively report data on a voluntary basis creates an opportunity for manipulating the commodity market data” submitted to Platts and its competitors.

Responding to questions from IOSCO last year, French oil giant Total said the price-reporting agencies, or PRAs, sometimes “do not assure an accurate representation of the market and consequently deform the real price levels paid at every level of the price chain, including by the consumer.” But Total called Platts and its competitors “generally… conscientious and professional.”

***

“Even small distortions of assessed prices may have a huge impact on the prices of crude oil, refined oil products and biofuels purchases and sales, potentially harming final consumers,” the European Commission said this week.

USA Today notes:

The Commission … said, however, that its probe covers a wide range of oil products — crude oil, biofuels, and refined oil products, which include gasoline, heating oil, petrochemicals and others.

***

The EU said it has concerns that some companies may have tried to manipulate the pricing process by colluding to report distorted prices and by preventing other companies from submitting their own prices.

***

Unlike oil futures, which set prices for contracts, the data used in the MOC process is based on the physical sale and purchase of actual shipments of oil and oil products.

***

According to Statoil, the EU investigation stretches back to 2002, which is when Platts launched its MOC price system in Europe. The suspicion is that some companies may have provided inaccurate information to Platts to affect the oil products’ pricing, presumably for financial gain.

Fox points out:

At issue is whether there was collusion to distort prices of crude, refined oil products and ethanol traded during Platts’ market-on-close (MOC) system – a daily half-hour “window” in which it sets prices.

But the European Commission also is examining whether companies were prevented from taking part in the price assessment process.

The Guardian writes:

The commission said the alleged price collusion, which may have been going on since 2002, could have had a “huge impact” on the price of petrol at the pumps “potentially harming final consumers”.

Lord Oakeshott, former Liberal Democrat Treasury spokesman, said the alleged rigging of oil prices was “as serious as rigging Libor” – which led to banks being fined hundreds of millions of pounds.

He demanded to know why the UK authorities had not taken action earlier and said he would ask questions of the British regulator in Parliament. “Why have we had to wait for Brussels to find out if British oil giants are ripping off British consumers?” he said. “The price of energy ripples right through our economy and really matters to every business and families.”

***

Shadow energy and climate change secretary Caroline Flint said: “These are very concerning reports, which if true, suggest shocking behaviour in the oil market that should be dealt with strongly.

“When the allegations of price fixing in the gas market were made, Labour warned that opaque over-the-counter deals and relying on price reporting agencies left the market vulnerable to abuse.

“These latest allegations of price fixing in the oil market raise very similar questions. Consumers need to know that the prices they pay for their energy or petrol are fair, transparent and not being manipulated by traders.”

Shadow financial secretary to the Treasury Chris Leslie said: “If oil price fixing has taken place it would be a shocking scandal for our financial markets.

The Telegraph reports:

“97 per cent of all we eat, drink, wear or build has spent some time in a diesel lorry,” said a spokesman for FairFuel UK, the lobbyists. “If it is proved, they have been gambling with the very oxygen of our economy.”

***

Platts – to determine the benchmark price – examines just trades in the final 30 minutes of the trading day. A group of half a dozen analysts gather round a trading screen and decide on the final price. As with much that goes on in the City, it is a surprisingly old-fashioned method, reliant on gentlemanly conduct. Critics say it leaves the market open to abuse, and the price can suddenly spike or fall in the final minutes of the day.

The New York Times notes of agencies like Platt and Argus Media:

Their influence is extensive. Total, the French oil giant, estimated last year that 75 to 80 percent of crude oil and refined product transactions were linked to the prices published by such agencies.

The Observer points out that manipulation of the oil markets has long been an open secret:

Robert Campbell, a former price reporter at another PRA, Argus – he is now a staffer at Thomson Reuters, which also competes with Platts and others on providing energy news and data – said this a few days ago in a little-noticed commentary: “The vulnerability of physical crude price assessments to manipulation is an open secret within the oil industry. The surprise is that it took regulators so long to open a formal probe.”

Reuters reports that the probe may be expanding to the U.S.:

In Washington, the chairman of the Senate energy committee asked the Justice Department to investigate whether alleged price manipulation has boosted fuel prices for U.S. consumers.

“Efforts to manipulate the European oil indices, if proven, may have already impacted U.S. consumers and businesses, because of the interrelationships among world oil markets and hedging practices,” Sen. Ron Wyden (D-Ore.), chairman of the Senate Energy and Natural Resources Committee, wrote in a letter to Attorney General Eric H. Holder Jr.

Wyden also asked Justice to investigate whether oil market manipulation was taking place in the United States.

Not only are petroleum products a multi-trillion dollar market on their own, but manipulation of petroleum prices would effect virtually every market in the world.

For example, the Cato Institute notes how many industries use oil:

U.S. industries use petroleum to produce the synthetic fiber used in textile mills making carpeting and fabric from polyester and nylon. U.S. tire plants use petroleum to make synthetic rubber. Other U.S. industries use petroleum to produce plastic, drugs, detergent, deodorant, fertilizer, pesticides, paint, eyeglasses, heart valves, crayons, bubble gum and Vaseline.

The India Times reports that:

The price variation in crude oil impacts the sentiments and hence the volatility in stock markets all over the world. The rise in crude oil prices is not good for the global economy. Price rise in crude oil virtually impacts industries and businesses across the board. Higher crude oil prices mean higher energy prices, which can cause a ripple effect on virtually all business aspects that are dependent on energy (directly or indirectly).

The Federal Reserve Bank of San Francisco notes:

When gasoline prices increase, a larger share of households’ budgets is likely to be spent on it, which leaves less to spend on other goods and services. The same goes for businesses whose goods must be shipped from place to place or that use fuel as a major input (such as the airline industry). Higher oil prices tend to make production more expensive for businesses, just as they make it more expensive for households to do the things they normally do.

***

Oil price increases are generally thought to increase inflation and reduce economic growth.

***

Oil prices indirectly affect costs such as transportation, manufacturing, and heating. The increase in these costs can in turn affect the prices of a variety of goods and services, as producers may pass production costs on to consumers.

***

Oil price increases can also stifle the growth of the economy through their effect on the supply and demand for goods other than oil. Increases in oil prices can depress the supply of other goods because they increase the costs of producing them. In economics terminology, high oil prices can shift up the supply curve for the goods and services for which oil is an input.

High oil prices also can reduce demand for other goods because they reduce wealth, as well as induce uncertainty about the future (Sill 2007). One way to analyze the effects of higher oil prices is to think about the higher prices as a tax on consumers (Fernald and Trehan 2005).

The Post Carbon Institute notes (via OilPrice.com) that high oil prices raise food prices as well:

The connection between food and oil is systemic, and the prices of both food and fuel have risen and fallen more or less in tandem in recent years (figure 1). Modern agriculture uses oil products to fuel farm machinery, to transport other inputs to the farm, and to transport farm output to the ultimate consumer. Oil is often also used as input in agricultural chemicals. Oil price increases therefore put pressure on all these aspects of commercial food systems.

Figure 1: Evolution of food and fuel prices, 2000 to 2009
Sources: US Energy Information Administration and FAO.

Economists Nouriel Roubini and Setser note that all recessions after 1973 were associated with oil shocks.

Interest Rates Are Manipulated

Unless you live under a rock, you know about the Libor scandal.

For those just now emerging from a coma, here’s a recap:

The big banks have conspired for years to rig interest rates … upon which $800 trillion in assets are pegged

This was the largest insider trading scandal ever … and the largest financial scam in world history

Local governments got ripped off bigtime by the Libor manipulation

Libor is still being manipulated

Derivatives Are Manipulated

The big banks have long manipulated derivatives … a $1,200 Trillion Dollar market.

Indeed, many trillions of dollars of derivatives are being manipulated in the exact same same way that interest rates are fixed: through gamed self-reporting.

Gold and Silver Are Manipulated

The Guardian and Telegraph report that gold and silver prices are “fixed” in the same way as interest rates and derivatives – in daily conference calls by the powers-that-be.

Everything Can Be Manipulated through High-Frequency Trading

Traders with high-tech computers can manipulate stocks, bonds, options, currency and commodities. And see this.

Manipulating Numerous Markets In Myriad Ways

The big banks and other giants manipulate numerous markets in myriad ways, for example:

Engaging in mafia-style big-rigging fraud against local governments. See this, this and this

Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details here, here, here, here, here, here, here, here, here, here, here and here

Charging “storage fees” to store gold bullion … without even buying or storing any gold . And raiding allocated gold accounts

Committing massive and pervasive fraud both when they initiated mortgage loans and when they foreclosed on them (and see this)

Pledging the same mortgage multiple times to different buyers. See this, this, this, this and this. This would be like selling your car, and collecting money from 10 different buyers for the same car

Cheating homeowners by gaming laws meant to protect people from unfair foreclosure

Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See this, this, this, this and this

Engaging in unlawful “frontrunning” to manipulate markets. See this, this, this, this, this and this

Engaging in unlawful “Wash Trades” to manipulate asset prices. See this, this and this

Otherwise manipulating markets. And see this

Participating in various Ponzi schemes. See this, this and this

Charging veterans unlawful mortgage fees

Cooking their books (and see this)

Bribing and bullying ratings agencies to inflate ratings on their risky investments

A Dollar-Yen Tale Told By An Idiot, Full Of Sound And Fury, Signifying Nothing

Tyler Durden — Mon, 20 May 2013 00:12:58 +0000

We are so deep inside the centrally-planned, Keynesio-monetarist Twilight zone, that the best we can advise is just laughing at the utterly ridiculous amounts of daily idiocy hitting the tape now on an hourly basis.

h/t @andrewyorks

19 Tornadoes Strike Kansas And Oklahoma In Three Hours

Tyler Durden — Mon, 20 May 2013 00:06:05 +0000

Bullish for GDP, foodstamps and BLS scapegoating of the weather as the reason for a weak May jobs report.

Full list of all reported tornaodes between 8PM and 11PM UTC:

Source: NOAA

Crushed By Soaring Energy Costs, Japan Prepares To Reactivate Its Nuclear Power Plants

Tyler Durden — Sun, 19 May 2013 23:51:10 +0000

In what was painfully obvious to everyone with half a brain months ago (see here) Japan's desperate gambit at reflating would backfire massively by sending energy prices soaring in a world in which Japan no longer has access to internally producer, nuclear power plants and is forced to import all of its energy from abroad. For a glimpse of the horrors awaiting Japan's utilities and those consumers lucky enough to have electricity in their homes, here is a chart of Japanese LNG costs expressed in Yen: hardly the stuff sustainable, discretionary income-led recoveries are made of. And this was three months ago: now it's much, much worse.

Because as we also showed using the chart below, unless Japan actually restarts its nuclear power plants, it is doomed to a future in which all the import-led price inflation goes to such trivial, non-core items as energy and, of course, food. But who cares about those...

Well, apparently after six months of dithering, Japan does.

First it was Japan's economy minister chiming in with his views on the fair value of the USDJPY (apparently, now it is too high), who also made it clear that Japan has no choice but to restart the same nuclear power plants that two years resulted in the biggest nuclear catastrophe since Chernobyl.

And now, proving that Japan has learned absolutely nothing from its recent past, it is now preparing to risk yet another Fukushima, just to make sure that Goldman's partners have a fresh year of record bonuses, driven by the BOJ's monetary insanity. Yomiuri Shumbun reports, that just two years after a wholesale shutdown of Japan's nuclear power plants demanded by the people, Japan is once again going to reactivate its nuclear power plants, much to the chagrin of the already massively irradiated local population.

Tokyo Electric Power Co. has decided to apply to the nuclear regulating body to restart two reactors at its nuclear power plant in Niigata Prefecture by the end of July, after revised safety standards are implemented earlier that month, it has been learned.

Reactivation of the two reactors at the Kashiwazaki-Kariwa nuclear power plant could help stabilize the power supply situation for eastern Japan, including the Kanto region, which is part of TEPCO’s service areas; and the Tohoku region, Tohoku Electric Power Co.’s service area for which TEPCO provides electricity. In doing so, the company could prevent electricity fees from rising further.

Reactivation of the reactors could also help TEPCO’s management reconstruction drive, as the utility faces additional fuel costs for thermal power generation to make up for power shortfalls due to the suspension of nuclear power reactors.

The application to the Nuclear Regulation Authority will be made for the Nos. 1 and 7 reactors at the Kashiwazaki-Kariwa plant in Niigata Prefecture. The move is expected to coincide with similar applications to be filed by four other operators for reactors at their five plants, according to officials.

So which nukes are set to go live?

The reactors could be reactivated after passing the NRA’s safety inspections and obtaining consent from local governments. The reactors that the four utilities are applying to restart are at:

Hokkaido Electric Power Co.’s Tomari nuclear power plant in Tomari, Hokkaido.

Kansai Electric Power Co.’s Takahama nuclear power plant in Takahama, Fukui Prefecture.

Shikoku Electric Power Co.’s Ikata nuclear power plant in Ikata, Ehime Prefecture.

Kyushu Electric Power Co.’s Sendai nuclear power plant in Satsuma-Sendai, Kagoshima Prefecture, and Genkai nuclear power plant in Genkai, Saga Prefecture.

The Kashiwazaki-Kariwa plant has boiling water reactors--the same type as those at the Fukushima No. 1 nuclear power plant, which suffered meltdowns following the March 2011 earthquake and tsunami.

But don't worry: this time there are "filters" in place to catch all that evil gamma radiation if and when the Fukushima disaster should repeat itself:

TEPCO has decided to apply for reactivation of the Nos. 1 and 7 reactors, as work to install filtered vents is expected to be completed by the end of July, according to officials.

The filters help minimize the amount of radioactive materials released into the air in the event of a serious accident. Under the revised safety standards, such vents will be required for nuclear reactors.

There is some hope the people will refuse to be willing Guinea pigs in what is rapidly becoming the most insane, ridiculous experiment, where disproving statist Keynesian voodoo may and will literally cost people their lives...

Hirohiko Izumida, governor of Niigata Prefecture, which has signed a safety agreement with TEPCO, remains cautious over the reactivation the Kashiwazaki-Kariwa plant reactors.

“We won’t discuss resuming operations [of the reactors] until results of the review into the crisis at the Fukushima No. 1 plant are presented,” he has said.

TEPCO’s study has revealed that faults beneath the buildings for the Nos. 1 to 3 reactors and the Nos. 5 to 7 reactors show signs of having shifted 200,000 to 330,000 years ago. TEPCO has said they are not regarded as active faults under the current safety guidelines, but could be under the revised guidelines. As a result, the utility may be told to reinvestigate the matter.

... Although we doubt it: it is only a matter of time before some Japanese central planner takes the mic, and reads the Goldman script, promising all disastrous future earthquakes and tsunamis have been henceforth banned and made illegal, and the BOJ will guarantee nothing bad can ever happen to the earthquake prone nation, located along one of the most active seismic faultlines in the world.

Adding Insult To Injury, South African Gold Mining Union Demands Up To 60% Wage Hikes

Tyler Durden — Sun, 19 May 2013 23:06:25 +0000

In case the complete disconnect of paper selling from physical hand-over-fist buying (see this chart to explain all the gold activity in Q1 which can be summarized in two words: paper liquidation) were not enough to send the price of precious metals to zero, then news that quite soon gold mining companies in one of the world's largest producers of gold may be going out of business, leading to a collapse in physical product, should be sufficient to really send precious metals well into negative territory. The only question will be if the GDX gets there first. Reuters reports that South Africa's National Union of Mineworkers said it would seek pay rises of up to 60 percent from gold and coal producers, raising the prospect of fresh strikes as firms battle higher costs and falling prices in an already heated labor climate.

We wish the mineworker union godspeed, and the best of luck, as in the current full retard gold supply/demand environment, only a complete halt in South African mining production will accelerate gold's price plunging to sub-extraction costs, as miner after miner mothball operations, only to see even further paper liquidation taking the price to laughably low levels (and why not negative?) yet making purchases of physical product completely impossible as there simply will be none left in the supply channel.

Silver Plunges As Yen Stop Surge Triggers Margin Liquidation

Tyler Durden — Sun, 19 May 2013 22:18:19 +0000

Not a moment after someone was slammed with a massive margin call following the hit of 102 USDJPY stops as we noted moments ago, was that same someone(s) forced to dump a whole lot of silver in thin, no volume trading taking out the entire bid stack on what can only be described as "get me the hell out and pay me anything" liquidation, sending the precious metal to just over $20, before yet another round of buying programs kicked in, and sent it right back up, allowing those quick enough to capitalize on some foolish macro trader's blowing up to pocket a huge profit before Japan has even woken up.

Thank you Kuroda, Bernanke and co for this total farce of a "market."