Tuesday, 22 March 2011

Buy Japan.

Baltic Dry Index. 1533 unch.

LIR Gold Target by 2019: $30,000. Revised due to QE.

"Thank God For Bank Bailouts"

Proper Charlie Munger.

Towns wiped off the map? Buy stocks. Infrastructure collapsed, no heat, fuel, and little food? Buy stocks! A continuing nuclear disaster involving 4 wrecked nuclear power plants polluting food supplies and seawater for miles and miles around? Buy more!! That’s the view of the “weasel of Omaha”, a fully signed up member of Lord Keynes’ “wreckage and disaster is good for the economy” nonsense on the dubious premise that everything has to be rebuilt eventually. Perhaps “the great bull of Omaha” should ask the USAF to bomb Omaha, so the pitiful survivors can have the joy of rebuilding it while the rest of us get on with buying stocks.

Below, today’s update on the continuing tragedy of Japan.

“There’s danger in just shoveling out money to people who say, ‘My life is a little harder than it used to be, at a certain place you’ve got to say to the people, ‘Suck it in and cope, buddy. Suck it in and cope.’”

Proper Charlie Munger.

Warren Buffett backs Japan to rebuild, sees 'buying opportunity'

Warren Buffett, the influential billionaire investor, has said that the earthquake and tsunami in Japan may have created a "buying opportunity."

By Louise Armitstead 7:09PM GMT 21 Mar 2011

The 80-year-old American, who is dubbed the "Sage of Omaha", said that the devastation had not changed the "economic prospect" of Japan.

He argued that the markets normally over-react in the wake of big disasters. Speaking in Daegu, South Korea, Mr Buffett said that the terrorists attacks on New York in 2001 "didn't change the future of the US or the economic prospect of the US." He said: "I feel exactly the same way after what's happened in Japan. People in Japan have the same energy, they have the same desire to move on and the same resources to rebuild."

He added: "I don't look at them differently from 10 days ago...Frequently, extraordinary events really create a buying opportunity."

His comments came as Japan's biggest companies started a second week of disruption caused by a shortage of power and supplies. Car manufacturers including Toyota, Honda and Nissan indicated that most of their operations in Japan would remain closed this week.

More.

http://www.telegraph.co.uk/finance/markets/8396287/Warren-Buffett-backs-Japan-to-rebuild-sees-buying-opportunity.html

MARCH 21, 2011, 10:52 A.M. ET

Worries Rise on Japan Impact

HONG KONG—Even as Japan appeared to turn a corner in its battle to contain damage to nuclear facilities, concerns are mounting about the economic fallout.

Asian markets reacted positively Monday to news that power had been restored over the weekend to some of the Fukushima Daiichi power plant. Trading in Japan was closed for a holiday, but Hong Kong's Hang Seng Index rose 1.7% and benchmark indexes in South Korea and Singapore gained more than 1%. Markets were also up across Europe in early trading.

The burden of a too-strong yen on Japan's export-dependent manufacturers—already battered by earthquake and tsunami—is lifting as well, after a rare group intervention by the Group of Seven leading economies last week to weaken the currency. The dollar was up against the yen in a thin holiday market Monday, at ¥81.20 in morning European trading from ¥80.60 late Friday in New York.

"We're less worried today than we were a week ago," said Frederic Neumann, co-head of Asian economics research at HSBC Holdings PLC. "Last week there was fear of a much more severe nuclear fallout. With the reconnecting of partial power supply that fear has receded."

But supply-chain problems continued to hit manufacturers that source parts from Japan. General Motors Co.'s South Korean unit said Monday that it will reduce production to prepare for a possible shortage of key components, following a similar decision by Renault SA's Korean subsidiary.

"The supply-capacity issue from Japan is more serious than we'd early thought," said Johanna Chua, Citigroup Inc.'s Asia economist, in a research note. That could slow the auto, technology and ship-building industries world-wide, she said.

Swiss Re, one of the world's biggest reinsurance companies, forecast claims of approximately $1.2 billion from the earthquake and tsunami—and warned in a statement that this estimate "is subject to a higher than usual degree of uncertainty" because it could take months to process claims, and because of the high proportion of commercial and industrial claims.

More.

http://online.wsj.com/article/SB10001424052748703858404576214271676234818.html?mod=WSJEUROPE_hpp_MIDDLETopNews

March 22, 2011, 12:29 a.m. EDT

Japan demand hopes spur refining shares

HONG KONG (MarketWatch) — Shares of Asian petrochemical and refining firms jumped Tuesday on hopes the supply gap created by capacity outages in the wake of Japan’s earthquake and tsunami would boost their utilization levels and profit margins.

Some — but not all — of the refining and petrochemical capacity that was shut down after Japan’s 9.0-magnitude earthquake on March 11 could come back on stream within days, in effect lifting demand for the remaining functional facilities within and outside the country, said analysts.

“Japan’s disrupted refining capacity could push Asian utilization rates above 90%. In addition, Japan’s extra demand for power generation and rebuilding efforts should add to oil consumption,” Macquarie analysts led by Linda Huang wrote in a note to clients.

----Refining and petrochemical facilities in northeastern parts of Japan affected by the earthquake and tsunami this month. In particular, Cosmo Oil Co.’s Chiba refining complex and JX Holdings Inc.’s refineries at Sendai and Kashima, are among those facilities that remain shut after suffering extensive damage from the disaster.

Cosmo was only able to put out a fire at its Chiba facility on Monday, though the site had been burning since the earthquake on March 11. While the company said it will take every action to resume normal operations “as soon as possible,” a company official speculated that it could be a year before gasoline and other petroleum products flow out of the refinery again, according to a Dow Jones Newswires report.

Morgan Stanley analysts led by Vinay Jaising wrote to clients Tuesday that about 1.4 million barrels per day out of Japan’s 4.3 million barrels per day of refining capacity remains shut at present, but nearly 55% of that capacity is expected to come back on stream within the next five days.

However, it could take between six and 12 months to resume operations, they said, requiring that local and overseas refiners step up their utilization levels to meet that gap in the interim.

The analysts also said that about 10.7 gigawatts of oil-fired power-generation capacity and 26.6 gigawatts of gas-fired capacity in Japan is currently operating at low capacity utilizations of 26% and 57%, respectively.

More.

http://www.marketwatch.com/story/japan-demand-hopes-spur-refining-shares-2011-03-22

Japan Extended Reactor’s Life, Despite Warning

By HIROKO TABUCHI, NORIMITSU ONISHI and KEN BELSON Published: March 21, 2011

TOKYO — Just a month before a powerful earthquake and tsunami crippled the Fukushima Daiichi plant at the center of Japan’s nuclear crisis, government regulators approved a 10-year extension for the oldest of the six reactors at the power station despite warnings about its safety.

The regulatory committee reviewing extensions pointed to stress cracks in the backup diesel-powered generators at Reactor No. 1 at the Daiichi plant, according to a summary of its deliberations that was posted on the Web site of Japan’s nuclear regulatory agency after each meeting. The cracks made the engines vulnerable to corrosion from seawater and rainwater. The generators are thought to have been knocked out by the tsunami, shutting down the reactor’s vital cooling system.

The Tokyo Electric Power Company, which runs the plant, has since struggled to keep the reactor and spent fuel pool from overheating and emitting radioactive materials.

Several weeks after the extension was granted, the company admitted that it had failed to inspect 33 pieces of equipment related to the cooling systems, including water pumps and diesel generators, at the power station’s six reactors, according to findings published on the agency’s Web site shortly before the earthquake.

Regulators said that “maintenance management was inadequate” and that the “quality of inspection was insufficient.”

Less than two weeks later, the earthquake and tsunami set off the crisis at the power station.

The decision to extend the reactor’s life, and the inspection failures at all six reactors, highlight what critics describe as unhealthy ties between power plant operators and the Japanese regulators that oversee them. Expert panels like the one that recommended the extension are drawn mostly from academia to backstop bureaucratic decision-making and rarely challenge the agencies that hire them.

Because public opposition to nuclear power makes it hard to build new power plants, nuclear operators are lobbying to extend their reactors’ use beyond the 40-year statutory limit, despite uneven safety records and a history of cover-ups. The government, eager to expand the use of nuclear energy and reduce the reliance on imported fossil fuels, has been largely sympathetic. Such extensions are also part of a global trend in which aging plants have been granted longer lives.

More.

http://www.nytimes.com/2011/03/22/world/asia/22nuclear.html?hp

Japan nuclear crisis: Fears mount over radioactive waste in food

Fears are mounting among Japanese health authorities that food and milk from areas surrounding the Fukushima nuclear plant could be contaminated with radioactive waste.

By Nick Allen, Tokyo 4:30PM GMT 21 Mar 2011

Yukio Edano, Japan's Chief Cabinet Secretary, said shipments of spinach from four provinces surrounding the plant had been halted. Milk shipments from Fukushima province have also been banned.

Mr Edano, the increasingly haggard face of the Japanese government's response to the crisis, sought to quell fears by saying radiation levels in food were not harmful to human health, and that he was prepared to eat contaminated produce himself.

He said: "Even if you eat and drink them several times it will not be a health hazard. So I would like you to act calmly without reacting." Asked if he would be happy to give spinach and milk to his family, he said: "Of course."

----The World Health Organisation appeared to disagree with Mr Edano, announcing that radiation seeping into food and water was "a lot more serious" than previously thought.

Peter Cordingley, the organisation's Western Pacific spokesman, said: "Quite clearly, it is not what we thought in the early stages. It is more serious.

"We have seen Japanese people in grocery stores paying close attention to where their produce is coming from, and we think this is a wise practice." In a Tokyo supermarket shoppers noticeably avoided spinach marked from northern Japan. Shopper Yukihiro Sato, 75, said: "I won't buy vegetables from that area."

More.

http://www.telegraph.co.uk/news/worldnews/asia/japan/8395985/Japan-nuclear-crisis-Fears-mount-over-radioactive-waste-in-food.html

In other news, can the US economy really recover without the real estate sector participating or leading? Can the Fed ever abandon QE programs given the collapse in real estate prices? Once on QE can a central bank ever abandon it without generating the depression the policy was brought in to prevent?

US house prices tumble to lowest in almost a decade

US house prices have tumbled to their lowest in almost a decade, raising the prospect that even a recovery in the labour market may not be enough to pull prices from their slump.

By Richard Blackden, US Business Editor 6:52PM GMT 21 Mar 2011

The median price of a previously owned home in the US fell to $156,100 (£96,800) in February, the lowest level since 2002, the National Association of Realtors (NAR) said on Monday. The overall volume of purchases declined 9.6pc during the month, weaker than was expected on Wall Street.

The collapse in house prices helped precipitate America's worst recession since the Great Depression, and a recovery is proving elusive.

Despite the construction of new homes falling to a record low level, the market remains burdened by an excess of supply generated during the boom. "If the house price declines persist, even with the job market recovery, that could hamper recovery in the housing market," said Lawrence Yau, the chief economist at the NAR.

February saw prices fall across the country, with declines reaching double-digits in the midwest and the south.

Distressed sales - or those in which a lender has repossessed the house or the owner has agreed to a price below the value of the outstanding mortgage - accounted for 39pc of all sales. While distressed sales should eventually help the market find a bottom, it is likely to mean further declines on the way.

More

http://www.telegraph.co.uk/finance/economics/8396480/US-house-prices-tumble-to-lowest-in-almost-a-decade.html

“I believe Costco does more for civilization than the Rockefeller Foundation”

Proper Charlie Munger.

At the Comex silver depositories Monday, final figures were: Registered 41.55 Moz, Eligible 62.57 Moz, Total 104.12 Moz.

+++++

Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

No crooks again today, just a warning from an American Libya expert that all may not be quite what it seems in Libya. In the good guys versus the bad guys, there are no good guys suggests this expert. Be careful of what you wish for. After Gaddafi may come the deluge, he suggests.

Apr├Ęs moi, le deluge

Moamar Gaddafi. With apologies to King Louis XV.

A Libyan Fight for Democracy, or a Civil War?

By DAVID D. KIRKPATRICK Published: March 21, 2011

TRIPOLI — The question has hovered over the Libyan uprising from the moment the first tank commander defected to join his cousins protesting in the streets of Benghazi: Is the battle for Libya the clash of a brutal dictator against a democratic opposition, or is it fundamentally a tribal civil war?

The answer could determine the course of both the Libyan uprising and the results of the Western intervention. In the West’s preferred chain of events, airstrikes enable the rebels to unite with the currently passive residents of the western region around Tripoli, under the banner of an essentially democratic revolution that topples Col. Muammar el-Qaddafi.

He, however, has predicted the opposite: that the revolt is a tribal war of eastern Libya against the west that ends in either his triumph or a prolonged period of chaos.

“It is a very important question that is terribly near impossible to answer,” said Paul Sullivan, a political scientist at Georgetown University who has studied Libya. “It could be a very big surprise when Qaddafi leaves and we find out who we are really dealing with.”

The behavior of the fledgling rebel government in Benghazi so far offers few clues to the rebels’ true nature. Their governing council is composed of secular-minded professionals — lawyers, academics, businesspeople — who talk about democracy, transparency, human rights and the rule of law. But their commitment to those principles is just now being tested as they confront the specter of potential Qaddafi spies in their midst, either with rough tribal justice or a more measured legal process.

Like the Qaddafi government, the operation around the rebel council is rife with family ties. And like the chiefs of the Libyan state news media, the rebels feel no loyalty to the truth in shaping their propaganda, claiming nonexistent battlefield victories, asserting they were still fighting in a key city days after it fell to Qaddafi forces, and making vastly inflated claims of his barbaric behavior.

More.

http://www.nytimes.com/2011/03/22/world/africa/22tripoli.html?_r=1&hp

“You get a bunch of very intelligent people sitting around trying to do good, I immediately get kind of suspicious and squirm in my seat.”

Proper Charlie Munger.

The monthly Coppock Indicators finished February:

DJIA: +156 Down 05. NASDAQ: +217 Down 11. SP500: +157 Down 4.

What’s next for our disaster prone world?  Trouble from the sun?

Sunspot Alert.

A big sunspot is emerging over the sun's southeastern limb, and it is crackling with activity. NASA's Solar Dynamics Observatory recorded a surge of extreme ultraviolet radiation from the sunspot's magnetic canopy on March 21st.

This appears to be the return of old sunspot 1165, last seen in early March when it formed on the sun's southwestern limb. Since then it has been transiting the far side of the sun, apparently growing in size and restlessness. The potential for trouble will become more clear in the hours ahead as the active region emerges in full.

http://www.spaceweather.com/

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