Sunday, 3 April 2011

Weekend Update April 3, 2011

Baltic Dry Index. 1520

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

"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."

F.A. von Hayek

We open with the latest on the continuing nuclear crisis in Japan. In dribs and drabs the truth dribbles out. Few outside Japan have much faith in TEPCO. The bad news is, many more nuclear power plants globally are at similar risk from earthquakes and tsunamis and with operators rated lower than TEPCO.

Engineers fail to seal radioactive leak at Japan nuclear plant

Sunday, 3 April 2011

Engineers tried to stem a leak of highly radioactive water spilling into the Pacific with a new method today after concrete failed to seal the crack at a Japanese nuclear power plant incapacitated by last month's earthquake-spawned tsunami. A search of site found no other leaks.

The wave has carved a path of destruction up and down the northeastern coast and is believed to have killed 25,000 people. The first deaths at the Fukushima Dai-ichi nuclear plant itself, though, were confirmed Sunday by the operator. A 21-year-old and a 24-year-old were conducting regular checks at the complex when the 9.0-magnitude earthquake hit March 11.

----The bodies were not discovered until Wednesday and had to be decontaminated. The announcement was delayed while authorities notified their families, TEPCO spokesman Kazufumi Suzuki said.

----On Saturday, authorities discovered a crack from which radioactive water was spilling into the Pacific — the first time they identified a direct source of sea contamination. The ultimate source of the water is believed to be the reactor cores.

A picture released by TEPCO shows water shooting some distance away from a wall and splashing into the sea, though the amount of water was not clear. The contaminated water will quickly dissipate in the ocean but could pose a danger to workers at the plant.

The 8-inch- (20-centimeter-) long crack is in a maintenance pit from which water containing levels of radioactive iodine far above the legal limit spilled into the ocean, said Hidehiko Nishiyama of Japan's Nuclear and Industrial Safety Agency.

Workers filled the pit with concrete but couldn't get it to dry.

Next, they injected polymer into a pipe that connects the pit to the rest of the system. The polymer can absorb enormous amounts of water and expands 50 times its original size. It's not yet known if that stemmed the leak.

The crack is believed to have been caused by the earthquake, though that is still under investigation. The reactor buildings and other structures in more sensitive parts of the plant are build to stricter codes and thus are better able to withstand earthquakes than the pit was, according to Nishiyama.

More than one in 10 nuclear power plants at risk from earthquakes

Many stations are in countries that would be less able than Japan to cope with disasters

By Jonathan Owen Sunday, 3 April 2011

Scores of nuclear power plants worldwide are at risk from tsunamis or earthquakes similar to the natural disasters that crippled Japan's Fukushima reactors, according to new research. Many at-risk plants are in countries less able to cope with a disaster than Japan, experts have warned.

Seventy-six operating power stations in Japan, Taiwan, China, South Korea, India, Pakistan and the US are located in areas close to coastlines deemed vulnerable to tsunamis.

Of 442 nuclear power stations globally, more than one in 10are situated in places deemed to be at high or extreme risk of earthquakes – in Japan, the US, Taiwan, Armenia and Slovenia – according to a new study by the analysts Maplecroft.

Helen Hodge, Maplecroft's natural hazards analyst, said: "Although Japanese nuclear facilities are particularly exposed, other countries could also face similar risks. South Korea, Taiwan, southern China, India, Pakistan and the west coast of the US have operating or planned nuclear facilities on tsunami-exposed coastlines, while nuclear sites in areas of high or extreme risk of earthquakes can be found in western US, Taiwan, Armenia, Iran and Slovenia."

Emeritus Professor Keith Barnham, a physicist from Imperial College London, commented: "Japan is one of the most advanced technological counties but one can see the problems they are having in coping with the aftermath. One fears for the reactors planned or operational in the environmentally unsafe areas of less technologically developed countries."


We end with a repeat warning of a financial earthquake to come in the USA. PIMCO, the world’s biggest bond fund has dropped its holdings of US Treasury Bonds. Clearly PIMCO sees trouble ahead if the Fed actually stops their quantitative easing buying program.

PIMCO's Bill Gross Drops U.S. Treasuries Like a Bad Habit

March 17, 2011 

The $237 billion Pimco Total Return Fund is the world’s biggest bond mutual fund. It is run by one of the most influential persons in the bond market – Bill Gross.

So when Mr. Gross speaks, people usually listen. And recently, he has spoken volumes – both in his words and in his actions.

In his March investment outlook for shareholders, Mr. Gross said that Pimco estimated that the Federal Reserve had been buying 70% of annualized issuance of U.S. Treasuries since its QE2 (quantitative easing/ money printing) program began. Mr. Gross last year aired his views on QE2, likening it to a Ponzi scheme.

In his latest statement, Mr. Gross said he was worried about – at the least – a temporary void in demand for U.S. Treasuries once QE2 ends in June. If he is correct about that, the yields for these bonds will rise and the prices will fall. This will hurt anyone holding Treasuries in their portfolio.

That’s why Mr. Gross has taken action to protect his shareholders. His Pimco Total Return Fund cut its holdings of U.S. government-related debt to zero for the first time since early 2008.

Now the fund holds approximately 23% in cash. The remainder is invested in U.S. mortgage bonds, corporate bonds, high yield bonds and emerging market debt.


Once on QE programs I think they are impossible to end without triggering the depression they were trying to prevent. We are all about to find out in June if the Fed is serious about ending its QE interventions that is propping up the US Treasury market. My guess is that any halt will be purely temporary, perhaps a little less than 90 days. 90 days on from a QE halt at the end of June, put US stock markets firmly in the midst of their traditional crash season. It’ll be a brave, reckless Fed that has US long interest rates soaring after they drop all the easy QE money. My guess is that Plan B, is a back door QE program bribing the primary dealers to pretend to hold them. Front door or back door, QE isn’t good for the dollar and will eventually trigger inflation. Stay long precious metals as the only hedge.

"When paper money systems begin to crack at the seams, the run to gold could be explosive."

Harry Browne


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