Japan

How governments all around the world resort to absurd marketing to finance largesse

After sending robots into the Fukushima nuclear reactor (and seeing them mysteriously die), perhaps this is the reason why Japanese officials have decided to re-start the building of a huge ice-wall for 'containment'. As Fukushima Diary reports, TEPCO’s camera caught a possible aquatic living creature in retained coolant water of Reactor 3.

With a birth-rate at record-lows and death-rate at record-highs, Japanese PM Shinzo Abe unveiled a new set of 'arrows' a few weeks ago to 'fix' the demographic disaster the nation faces. At the time, Abe was long of "bold proposals" but short of actual policies to encourage the nation to make more babies (despite dwindling interest in sex). As Bloomberg reports, here are a number of options that Abe's new minister for demographics Kato could introduce to slow the downward spiral of population...

"Stunning, historic, mind-boggling, and catastrophic" is how Weather Underground's Jeff Masters sums up Hurricane Patricia, which intensified to an incredible-strength Category 5 storm with 200 mph winds overnight as it approaches the Mexican coast. As The NY Times reports, The World Meteorological Organization warned that the hurricane’s strength was comparable to that of Typhoon Haiyan, which caused devastation in the Philippines in 2013, and so Mexico has declared a state of emergency for Puerto Vallarta (with officials warning that storm surges could cause waves of up to 39 feet) as she is forecast to hit the coast between 6 and 10pm ET. Hurricane Patricia is "uncharted territory."

Now that Mario Draghi has telegraphed more easing from the ECB come December, the question is what exactly the bank will announce. Will Draghi cut the depo rate further into negative territory? How long into 2017 will PSPP be extended? Given the scarcity of purchasable paper, will the ECB expand the universe of eligible assets and if so, will Draghi go full-Kuroda knowing full well that you never, ever go full-Kuroda?

There is no alternative except to take cover because the latest stock market rip is based on pure central bank hopium. Indeed, Mario Draghi has confirmed once again that the world’s central bankers have a monetary death wish. Unlike the gamblers who bought Cramer’s top 49 stock picks, the best course of action is to sell, sell, sell—–and do it now.

Overnight weakness on the back of 8-month highs in Chinese crude inventory (combined with the recent plunge in super-tanker rates - i.e. China is no longer refilling its SPR) sent WTI Crude towards the critical $44 level (which has acted as support for 2 months). The China rate cut weakened crude further as PBOC admitted it was needed because of the state of the economy. And then Baker Hughes reported a total rig count unchanged 787 (lowest since April 2002) and an oil rig count decline of just 1 to 594 (the 8th weekly drop in a row). WTI slipped on the news.

To say that China, which a few days ago reported GDP of 6.9% which "beat" expectations and which a few hours ago reported Chinese home prices rose in more than half of tracked cities for the first time in 17 months, stunned everyone with its rate cut on Friday night, meant clearly for the benefit of US stocks, as well as the global commodity market, is an understatement: nobody expected this. As a result strategists have been scrambling to put China's 6th rate cut in the past year (one taking place just ahead of this weekend's Fifth plenum) in context. Here are the first responses we have seen this morning.

• CHINA CUTS BANKS’ RESERVE REQUIREMENT RATIO
• CHINA CUTS 1-YEAR LENDING RATE BY 0.25 PPT
• CHINA CUTS 1-YEAR DEPOSIT RATE BY 0.25 PPT
• CHINA CUTS RESERVE RATIO BY 0.5 PPT

Yesterday morning, when previewing the day's tumultuous events, we said that "Futures Are Firm On Hope Draghi Will Give Green Light To BTFD." And boy did Draghi give a green light, that and then some, when his press conference unleashed one of the biggest one-day US equity rallies in 2015. This morning it has been more of the same, with global market momentum on the heels of Draghi's confirmation that Europe's economy is again backsliding (it's a good thing, if only for stocks), leading to momentum for US equity futures, which together with soaring tech/cloud, earnings if no other, are on their way to take out recent all time highs.

Given what the Japanese have been subjected to in the past two and a half years of QQE, it is nearly criminal to suggest they need only more of it. None of it has worked as promised and stated, so what might have changed? Absolutely nothing except the arrangement of qualifiers and excuses that litter the same shared central bank speech delivered over and over of late. Kuroda says “robust”, Yellen proclaims “strong”, and both only confirm they live not of this world’s economy.

From the bowels of Australia’s iron ore mines to the top of Dubai’s pointless 100 story office towers, the entire warp and woof of the global economy has been distorted and bloated by the central bank money printing spree of the last two decades, led by the red credit machines of Beijing. Everywhere economies have succumbed to over-building, over-consumption, over-financialization and endless dangerous, unstable speculation. Stated differently, China’s red capitalism is the new black swan. There is nothing rational, stable or sustainable about it.

The Fed has created permanent housing crisis from which there is no escape.

Despite today's ridiculous melt-up in US equities - all driven by USDJPY-correlated algos - after the completion of over 9 months of this year, the median stock in the United States has officially gone nowhere.

Goldman: "we think a 10 bps (surprise) deposit cut is worth two big figures downside in EUR/$. At the very least, following today’s press conference, a December deposit cut is now possible, meaning that EUR/$ – which went into the meeting at around 1.13 – should reprice to 1.11....  there is a good chance that December will instead bring an actual augmentation of the QE program, such that downside in EUR/$ might be larger. The kind of scenarios our European economics team envisage imply downside of at least 5-6 big figures from here, i.e. should see us return to near the 1.05 low that EUR/$ made in March."