Japan

Fukushima Radiation Plume Hit Southern and Central California

All you need to read and more.

Gold has been trading in a tight box around $1,660/oz today, as eurozone finance ministers meet in Copenhagen to discuss the scale of the permanent “bailout fund” set for July. Gold has been stuck in range of roughly $1,630/oz to $1,700/oz in recent weeks as risk appetite has returned after the latest European debt “solution” which saw the battered can kicked down the shortening road once again. Nothing has been solved with regard to the European debt crisis, and debt crises in Japan, the UK and the US now loom. The misguided panacea of heaping debt upon debt and shifting debt onto government balance sheets, debt monetisation and currency debasement is leading to continuing currency devaluations internationally. Despite this or maybe because of this - risk appetite returned with a vengeance as evidenced in equities internationally rising to multi-month and multi-year highs and the slight weakness in gold in March. So far in 2012, gold has performed well and is set to end the first quarter in 2012 with gains in all major currencies. Gold is 6.3% higher in US dollars, 3.2% higher in euros, 3.1% higher in pounds, 2.25% higher in Swiss francs and 12% higher in Japanese yen which fell sharply in the quarter.

• Greek PM does not rule out new bailout package (Reuters)
• Euro zone agrees temporary boost to rescue capacity (Reuters)
• Madrid Commits to Reforms Despite Strike (FT)
• China PBOC: To Keep Reasonable Social Financing, Prudent Monetary Policy In 2012 (WSJ)
• Germany Launches Strategy to Counter ECB Largesse (Telegraph)
• Iran Sanctions Fuel 'Junk for Oil' Barter With China, India (Bloomberg)
• BRICS Nations Threaten IMF Funding (FT)
• Bernanke Optimistic on Long-Term Economic Growth (AP)

A bevy of economic data misses overnight, including German and UK retail sales, Japan industrial production, UK consumer confidence, and a European economy which is overheating more than expected (2.6% vs 2.5% exp, although with $10/gas this is hardly surprising), and futures are naturally green. The reason: the broken record that is the European FinMins who are now redirecting attention from the slowly fading LTRO impact to the good old standby EFSFESM, which according to a statement by de Jager has now been agreed on at €800 billion, lower than last week's preliminary expectation for €940 billion in joint firepower. That this is nothing but a headline grabber is as we have noted before, as there is much doublecounting, capital allocation to and by the PIIGS as well as funding already assigned. It will likely take stocks some time before the realization dawns that this is not new capital and liquidity entering the markets, unlike QE on either side of the Atlantic, while the amount is largely inadequate to fill the multi-trillion liquidity shortfall, let alone "solvency" of European sovereigns and banks. So for now enjoy the greenness all around.

All you need to read and more.

• Obama budget defeated 414-0 (Washington Times) yes, the Democrats too...
• German Central Banker: ECB Loans Only Buy Time (AP)
• Baku grants Israel use of its air bases (Jerusalem Times)
• Japan May Understate Deflation, Hampering BOJ, Economist Says (Bloomberg)
• BRICS flay West over IMF reform, monetary policy (Reuters)
• Five Portugal Lenders Downgraded by Moody’s (Bloomberg)
• SEC Registration Captures More Hedge Fund Advisers (Bloomberg)
• EU Nears One-Year Boost in Rescue Fund to $1.3 Trillion (Bloomberg)
• Consumers plot emergency oil release as Saudi decries high prices (Reuters)
• Japan Plans to Draft Stopgap Budget for First Time in 14 Years (Bloomberg)

Yesterday we presented what the balance sheet of the developed, or better known as insolvent, world- recall there was over $21 trillion in excess debt as of 3 years ago, looks like, and the curious to some observation that trillions in liabilities also double up as assets, in what is easily the world's most confounding (to central bankers at least) global circle jerk. After all, one can not inflate liabilities, without also destroying the assets these double count as  at the same time. Yet while informative, that chart did not tell us anything we did not already know. However, the next chart we will present today will show a different aspect of the developed world, namely by indicating how the households of the three "richest" economies - Japan, the US and the Euro Area, have invested their money in various financial assets. And while this is merely the asset side of the ledger it shows how distinctly different the approach to capital allocation has been for countries in different stages of growth or ungrowth. What is most notable is the distinct distribution of capital in shares and equities within the three regions: it also shows why a sustained downtick in the US stock market is the deathknell of the modern economic experiment. What is also curious is that the investment of Japanese households into Insurance and Pension reserves, which in turn are then funneled into JGBs, is no larger than the US or European equivalent: it means that the true funding cost of the welfare state is roughly a third of all modern financial assets.

Okay, the coast is clear. Everyone buy PIIGS debt to boost pensioon fund yield -or- Media assisted .gov dis(not "mis")information fails to stand up to arithmetic fact!

Two days ago we posted a very damning analysis of why Japan is finally facing the dilemma of either a major Yen devaluation, or, far worse, a long-overdue pop in the Japanese Government Bond (JGB) market. As expected, the conventional wisdom was that there is no danger of a JGB collapse as local households just can't get enough of JGBs following 30 years of straight deflation. As even more expected, conventional wisdom always ends up wrong, and this may be the case now. Bloomberg reports that "Finance Minister Jun Azumi’s efforts to get Japan’s households to increase investment in the nation’s debt are failing as holdings of government bonds fall to a seven-year low." Combing through the Japanese quarterly flow of funds report shows something very disturbing - the last bastion of JGB ownership, Japan's households, have started to shift out of bonds, which are now yielding 0.27% for the retail 5 Year bond, and about 1.00% for the 10 year, and are now putting their money straight into mattresses. "Japanese households owned 3.09 percent of domestic bonds in the final quarter of 2011, a decrease from 3.2 percent in the third quarter and the lowest since 2005, Bank of Japan data released March 23 show." And the worst news for any domestically funded ponzi regime: "Mrs. Watanabe” as many are housewives, have instead increased foreign-currency deposits and cash, according to the BOJ data.  "It’s a case of retail JGBs not having enough yield,” said Naomi Fink, head of Japan strategy at Jefferies Japan Ltd."Households are accumulating cash and using financial investments to diversify into higher yields and JGBs don’t really provide this." ..."Individual investors are holding cash rather than bonds and other financial assets because they are wary of making risky investments, said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo." Needless to say, when even Japanese households have given up, it's game over... for bubbles in both bonds and in "conventional wisdom."

• Greece's Fringe Parties Surge Amid Bailout Ire (WSJ)
• ECB fails to stem reduction in lending (FT)
• More Twists for Spanish Banks (WSJ)
• Banks use ECB cash to buy bonds, lend less to firms (IFR)
• UK still long way off pre-crisis growth – King (Reuters)
• Dublin confident of ECB deal to defer payment (FT)
• Goldman's European derivatives revenue soars (Reuters)
• Japan Faces Tax Battle as DPJ Finishes Plan on Sales Levy (Bloomberg)
• Insurance Mandate Splits US Court (FT)

It is rather surprising that in a world in which anything and everything is only about money, it is next to impossible to find a consolidated balance sheet of the world's insolvent economies (i.e., the developed countries: US, Japan and the Euro Area). So for all those seeking a visual presentation of all the liabilities that have to be inflated away by the central banks (because that's what this is all about), rejoice: the broke world is presented below in its glory. The irony is that the problem would be quite fixable if it weren't for one minor issue: the bulk of the world's assets also happen to be its liabilities! At the end of the day, this may prove to be the fatal flaw in the chairman's attempt to dilute the global liabilities, he will be doing the same with the assets.

Much has been made of the lack of retail participation in the casino equity market rally of the last few months (and few years for that matter). Whether it is a signal of the individual investor's overly anxious nature and only the pros 'get it' or more likely this is the end of the baby-boomer-driven secular savings and investment bonanza is perhaps more likely as a nation of soon-to-be-retirees rotate from massive-drawdown-inducing stocks (no matter how diversified your group of trees, when the tornado hits the forest, they all fall down) to the relative (low-drawdown) safety (and steady income) of fixed income. Nowhere is this 'its different this time' secular shift more evident than in cumulative fund flows.

All you need to read and some more.

And Number 2 Reactor Running Out of Water ...