Tuesday, March 15, 2011

Shut Down Nuclear

by Beppe Grillo

Il giorno 11 marzo 2011 il mondo è cambiato. Nulla sarà più come prima. Siamo entrati nel post nucleare. Una nuova era in cui non ci sarà più spazio per i deliri dell'energia dell'atomo. Il Giappone si è immolato per noi, certo non volontariamente, ma è ciò che è successo. Se l'incubo nucleare che ci accompagna dal dopoguerra, da Chernobyl a Three Mile Island, cesserà (e cesserà) lo dovremo al sacrificio di milioni di persone in fuga dalla nube di Fukushima. Un esodo biblico. Neppure immaginabile. Il Giappone rischia di diventare l'isola che non c'è, un luogo dove non si entra e non si esce. Una trappola nucleare. Se persino la portaerei Reagan ha abbandonato la sua missione umanitaria, quali flotte accorreranno in soccorso delle popolazioni del l'Est del Giappone? Le merci giapponesi contaminate non potranno più uscire dal Paese.

Le nubi non si fermano. Forse arriveranno fino in Europa se il vento soffierà verso Ovest. Il senso di quello che è successo è troppo grande, troppo profondo per poterlo afferrare, ma qualcosa si può intuire. Le persone hanno capito immediatamente che il nucleare è finito per sempre. Alcuni capi di Stato hanno già preso posizione contro le centrali, sanno che continuare sarebbe la loro fine politica. Succede in Germania, in Svizzera, perfino in Australia che possiede il 28% dell'uranio mondiale. L'Italia, in questo scenario, recita la parte del giapponese sperduto in un'isola del Pacifico che continua a combattere dopo dieci anni dalla fine della guerra. Personaggi che finiranno presto nel dimenticatoio del ridicolo con le loro affermazioni nucleariste.

La Prestigiacomo è l'unico ministro dell'Ambiente nel mondo che vuole nuove centrali nucleari. Lei, Testa, Veronesi, Berlusconi, Cicchitto, Scaroni, Maroni, Casini, Fini, Frattini e i pennivendoli fusi del nocciolino nucleare sono come i fascisti che giravano in divisa da federale dopo il 25 aprile. Le loro dichiarazioni sono da conservare per il futuro, i loro volti, i video, le argomentazioni sono la testimonianza di un preciso momento, l'ultimo. Domani, tra qualche giorno o qualche mese, non potranno più permettersi di sparare stronzate. L'unico motivo per cui si vuole il nucleare è il debito pubblico di 500 miliardi di euro in mano alla Francia. L'EDF è il mandante, Berlusconi e la Confindustria gli esecutori interessati.

Questa classe politica sarà spazzata via dal referendum del 12 e 13 giugno. Da questa settimana partirà un'iniziativa che durerà fino al referendum: "Spegni il nucleare". Voglio coinvolgere milioni di italiani, non ci sono alibi. Con il quorum Maroni ci potrà fare il bunga bunga solitario. Il 29 aprile ci sarà l'assemblea dell'ENEL delle centrali nucleari, io ci sarò, il blog ci sarà con la diretta streaming. Loro non si arrenderanno mai (ma gli conviene?). Noi neppure.

Interactive Graphics on Earthquakes, Nuclear Accident

By Barry Ritholtz

The MSM has a series of terrific interactive charts, maps and animations:
Let’s start with the WSJ‘s Pacific/Australian tectonic plates. Note how many major earthquakes have occurred in this region.

click for larger chart, go here for article and interactive graphic

Next up is the NYT, which first looks at both how reactors work:
click for interactive graphics

And then the specific issues in the Japanese Fukushima Daiichi Nuclear Power Station:
click for interactive graphics

Japan’s Nuclear Crisis Escalates (WSJ)
Panic Selling in Japan Weighs on Global Markets (NYT)
How a Reactor Shuts Down and What Happens in a Meltdown (NYT)

Will Japan Earthquake Send Gasoline to $5

Bob van der Valk & Dian L. Chu write: The fallout on the fuel market will be severe following the 9.0 Japanese earthquake on Friday, March 11. 2011, since Japan will have to supplement their nuclear energy power production with coal, natural gas and oil-fired power plants. 

Information is short and hard to obtain about the status of the nuclear power plants in Japan. Not being a nuclear physicist it is hard to sort the facts from the hysteria. However, we are now hearing and seeing different versions between watching the live feeds on T.V. and Twitter as events enfold.  From multiple sources, here is some information we have at the moment. 

Japan is the third largest country in the world in terms of nuclear energy production, following France, and the U.S. which is in first place (see table). The country gets about 30% of its power from nuclear sources. Reportedly, 11 nuclear reactors and 21 thermal power plants where shut down after the earthquake, and BBC News put the reduction in output at Japan's nuclear power generators at anything from 25% to 50%.

On top of the loss in the power generation capacity, the Wall Street Journal reported that about 1.2 million barrels per day refining capacity in Japan is also shut down after the earthquake disaster. With this much capacity off line, Japan needs to secure alternative means of generating power and petroleum products as well.

Meanwhile, diesel fuel and coal are readily available. Cargoes of diesel fuel can be shipped almost immediately from the U.S. West Coast refineries to meet up with this new found Japanese demand.

The following graph shows the world refining capacity and how much North America and Far East Asia use crude oil for fuel production:
More refineries will have to be brought into production with economics justifying their running at full capacity. It may not cause crude oil to spike up, but it will most likely test whether consumers are going to be willing to pay $5 per gallon for gasoline and diesel fuel in the U.S.

San Antonio-based refiner Valero Energy Corp. (VLO) closed their 235,000 barrels per day located on the island of Aruba in the Caribbean in July 2009, after the plant had been losing tens of millions of dollars a month.

Valero re-started their refinery near the end of 2010 because of improving economic conditions. Valero has since completed refinery wide maintenance at the plant and is ready to go at full capacity. It will be “just in time” to make up the anticipated shortfall in middle distillate demand expecting to increase after the powerful 9.0 earthquake in Japan.

Closer to Japan, one of China’s largest refineries, Sinopec, recently suspended refining operations in Maoming due to high crude oil prices. The 270,000 barrels a day plant stopped delivering fuel and petroleum products in March 2011, because the Chinese government establishes the price for fuels delivered to the market by their local refineries.

Those fuel prices set by Beijing are equivalent to crude oil prices at $85 a barrel versus today’s Brent ICE posting of $113 a barrel. The difference in the allowed fixed price for fuels and the cost of crude oil leaves privately owned refineries in China with a negative crack spread.

PetroChina Co Ltd, which is Asia’s largest oil and gas company, has been having similar difficulties. It has been losing money in their oil refining segment resulting from an increase in crude oil prices due to the unrest in North Africa and the Middle East.

Now, diesel fuel prices on the U.S. West Coast are already amongst the highest in the country, and will be impacted by the March 11th earthquake in Japan. The bulk of the price action will likely fall on diesel fuel, but crude oil could be affected as well.

In the end it will not be about the price of Brent or West Texas Intermediate (WTI) crude oil, but refineries being geared up to keep up with new found demand from Japan for their fuel products.

U.S. Interest Rates Are On The Launch Pad

A few months ago, the chorus sung by the recovery cheerleaders reached a crescendo when expanding consumer credit statistics and surging US trade deficits provided them with "evidence" of an economic rebound. In declaring victory, they overlooked the very nucleus of this past crisis: namely, the enormous debt levels and bubbling inflation that created fragile asset bubbles. If they had recognized the original problem, they would have remained silent. In reality, only a reduction in US debt levels or increase in the value of the dollar would have signaled a budding recovery; but, thanks to the Federal Reserve and Obama Administration, there is virtually no way those results will ever be seen.

Last week's Flow of Funds report issued by the Federal Reserve clearly underlines the fact that we, as a country, haven't just avoided deleveraging, but rather continue to accumulate debt. At the end of the last fiscal year, total non-financial debt (household, business, state, local, and federal) reached an all-time record high of $36.2 trillion. Not only is the nominal level of debt at a record, but also debt-to-GDP - a far more worrying statistic. In Q4:07, total non-financial debt registered 222% of GDP. In 2008 and 2009, it was 238% and 243% respectively. As of Q4:10, that figure had risen to 244% of GDP, For some perspective, look back to the turn of the millennium, when total debt-to-GDP was 'just' 182%. Even that level points to a sick economy, but today's make you wonder how the patient is still breathing.

It is clear to me that the overleveraged condition which brought the economy down in 2008 still exists today - only worse. For all the suffering and displacement that has gone on, all we have accomplished is an unprecedented transfer private debt onto the Treasury's balance sheet. Now that the Fed is (hopefully) just months away from taking the printing presses off overtime, the paramount question is how fast interest rates will climb. The Fed has been able to keep yields this low through relentless devaluation and a propaganda campaign that convinced the majority of investors that deflation was a credible threat (kinda like those phantom Iraqi WMDs).

But Washington's ability to continue that ruse is coming to an end. The unrelenting growth of the Fed's balance sheet, increasing monetary aggregates, surging gold and commodity prices, $100/barrel oil, soaring food prices, and trillions of dollars of new debt projected for the near future have served to vanquish the deflationists. Any echoes of those once prominent voices can barely be heard amid the thunderous roar of oncoming inflation.

So therein lies the problem for the Fed. Any further debt monetization by the central bank now becomes counterproductive. That's because as inflation rates climb, bond investors demand higher interest rates. The lower real interest rates become, the less participation there will be in the bond market from private sources. If you don't believe me, ask Bill Gross.

The Fed is now damned if it does and damned if it doesn't. Interest rates have been artificially suppressed for such a long time that no matter what Bernanke does come June, interest rates will rise. If it enacts another iteration of Quantitative Easing, the Fed may find itself the only player in the bond market. Of course, the Fed could potentially buy all of the auctioned Treasury debt in order to keep rates low-as uncomfortable a position as that may be-but still all other interest rates, from bank loans to municipal debt, would skyrocket. Unless... the Fed decided to buy all that debt too. Hello Zimbabwe!

That scenario is still farfetched, but Bernanke's logic eventually leads there. The truth is that only a central banker could afford to own bonds that are yielding rates well below inflation, and growing even more so. Even if Bernanke ceases firing dollars into the bond market, yields will still have to rise to the level at which they provide a real return. How much higher would rates go, you ask? Well, Mr. Gross has some thoughts on that: 

"Treasury yields are perhaps 150 basis points or 1½% too low when viewed on a historical context and when compared with expected nominal GDP growth of 5%. This conclusion can be validated with numerous examples: (1) 10-year Treasury yields, while volatile, typically mimic nominal GDP growth and, by that standard, are 150 basis points too low; (2) real 5-year Treasury interest rates over a century's time have averaged 1½%, and now rest at a negative 0.15%!; (3) Fed funds policy rates for the past 40 years have averaged 75 basis points less than nominal GDP, and now rest at 475 basis points under that historical waterline."

To the above I say: not a bad start, Mr. Gross, but these aren't exactly average times. We have never had a Fed balance sheet anywhere near the $2.6 trillion that it is today. The nation has never faced the prospect of $1 trillion deficits as far as the eye can see. Nor have we ever had our total debt as a percentage of GDP reach 244%.

The bottom line is that a massive increase in the supply of debt coupled with a rising rate of inflation will always place upward pressure on interest rates. Once the Fed steps aside from buying 70% of the Treasury's current auctioned output, it will leave a gaping hole. And for those Pollyannas who claim we are in an economic recovery, I would ask them the following questions: Who will supplant the Fed's purchases of Treasuries at current yields? Since the level of debt in the economy has grown since the recession began, why won't rising rates place us back into an economic funk? Can the Fed unwind its balance sheet before inflation ravages the country? And, if the Fed isn't able to raise rates significantly, what will stop the dollar from collapsing? 

Then again, I guess it all comes down to one simple question: do you believe the laws of supply and demand apply to US Treasuries? If you do, then watch out for soaring yields.

Earthquake's Effect on the Solar Energy Industry

The 8.9 magnitude earthquake not only wiped out people's belongings in northern Japan, but also destroyed supply chains from various industrials. The nuclear power industry was especially hit hard due to the chain reaction resulting meltdown of the metal containers in the reactors. Numerous organizations and governments around world protect against nuclear energy as a major source of energy on this planet because it is simply not safe in such scale a disaster.

Countries such as USA, China, Japan and Australia are most susceptible to big earthquakes. It is reported that Southern California is way overdue for a big hit, it is not a question of "if" but "when." California has two operating plants: Diablo Canyon and San Onofre, both are vulnerable to earthquakes. This causes serious concerns in the region. Naturally, last week's earthquake changed the mentality of how people should approach renewable energy in the future. We will not likely give up nuclear energy, but the problem is that no safety rule is strict enough to guarantee safe operations if a big earthquake strikes. As a result, nuclear power will likely play a smaller role in the future energy market, while solar and wind energy are much more secure, safer and easy to distribute.

The earthquake also has impact on the solar energy industry. Japan accounts for 1/4th of global solar production, including solar panels and polysilicon. Most of these products are sold in domestic markets, some polysilicon is shipped overseas. The earthquake caused shutdown of production from Sanyo (SANYY.PK), Panasonic (PC), the Kyocera Corp. (KYO) and Sharp (SCHAY.PK). Some facilities are not severely damaged, but what impacts the industry is the infrastructure. It is believed that at least 2-3 months will be needed to repair the power grid. Without electricity, the solar industry will remain shutdown for foreseeable future. The supply chain is not there any more. It will even take longer to repair the roads and ports in the northern coast. 

Japan may have two weeks of inventory for panels and wafers. M. Setek, a solar wafer supplier, has completely shut down its facilities due to the damage caused by the earthquake. It supplies wafers to Sunpower (SPWRA). Companies benefiting the most are the polysilicon producers such as LDK solar (LDK) and ReneSola (SOL). Both will fill the gaps left by Japanese companies. Sunpower, Sharp and Kyocera will likely have to place orders from LDK and SOL to solve the supply problem, and they may have to pay high price for the wafers. We believe Suntech power (STP), Jinko Solar (JKS) and Trina Solar (TSL) will not be affected by the shortfall, as they have long term contracts in place. Yingli green (YGE) is a vertical integration company, so it is barely impacted.

The sentiment is shifting towards to solar energy as governments from Japan, China, France, Italy and Germany are considering boosting the solar energy shares in their renewable energy portfolios. People of these countries are putting lots of pressure on politicians to shift their energy policies to favor solar energy. In the next 2-3 months, new policies from the countries of major solar markets are expected to be enacted. The German government has indicated that existing nuclear plant operations will not be extended as most Germans are opposed to nuclear power. It is certain that leaders in Japan will rigorously set policies to promote solar power as opposed to nuclear power in their next congressional meeting.

Australian farms uniquely exposed to Japan crisis

by Agrimoney.com

Shares in Australian forestry group Gunns took losses in two days to 17%, as the country's reliance for agricultural trade on earthquake-devastated Japan for agricultural trade.
Gunns said it had not been a "significant" supplier of wood products to mills runs by Nippon Paper Industry which are believed to have been particularly affected by Japan's earthquake and tsunami.
Indeed, Gunns sales commitments to Japan "are predominantly to mills located outside of the directly affected region", the Tasmanian-based group said.
Nonetheless, with a warning that other Japanese paper mills were "undertaking plant assessments prior to recommencing production", the statement provided only partial reassurance to investors, who sent shares in Gunns a further 5.1% lower on Tuesday to Aus$0.465, their lowest close in nine months.
Australia-Japan ties 
The fall came as Luke Mathews at Commonwealth Bank of Australia highlighted Japan's status as the top buyer of Australian agricultural products, with its imports averaging Aus$4.8bn a year, or 19% of the total, according to official statistics.
Japan the top importer of Australian beef, cheese, cottonseed, fish and sorghum, and the second-biggest buyer of barley, canola and wheat.
"Japan's relevance for the Australian agricultural market is more pronounced than their importance for global agriculture markets," Mr Mathews said.
"Because of this export reliance, an unexpected downturn in the Japanese economy could place pressure on the Australian agriculture industry."
Food uptick?
Nonetheless, values of many agricultural products proved relatively resilient, with east coast Australian wheat futures shedding 4% to Aus$288.50 a tonne, for the most-traded January 2012 lot, since the earthquake struck Japan.
Indeed, some analysts have identified a potential uptick from Japan's distaster to the country's demand for foreign food.
Shares in Australian Agricultural Company, which last month highlighted the 30% jump in its wagyu beef cattle herd aimed at the Japanese market, have fallen 4.2% over the two days, not far beyond the average drop of 2.5% in Sydney-listed stocks.
GrainCorp, the grain handler, saw a sharp slide in its shares reverse, to leave them down only 1.3% this week.
Stock in agrichemicals group Nufarm, which counts Japan's Sumitomo Chemical as a significant shareholder and trading partner, has fallen by 4.1%.
Nufarm and Sumitomo on Tuesday unveiled a formula-swapping agreement "to develop new and innovative crop protection solutions".

Coal prices may climb on Japan crisis

by Commodity Online

Global coal prices are likely to advance further if power plants in Japan remained closed for long time.

Analysts said Japan is the world’s largest coal importer and if repair works at its nuclear reactors become long term, competition to buy steaming coal will heighten, which is projected to raise global coal prices.

Japan is estimated to have lost 9,700 megawatts of nuclear and 10,831 MW of thermal power following the devastating quake and tsunami, putting the onus on other plants to fill the gap.

Meanwhile, South Korea, the world's third-largest coal buyer said its economy would have no short-term impact on its coal supply as utilities own 20-day consumable coal in their inventories, or about 4 million tones combined.

It noted local coal demand is estimated at about 200,000 tons per day.

The Impact Of Japan's Earthquake On The Economy

by Zarathustra W.

I initially thought that the impact will be limited.  Unfortunately, as the aftermath of the earthquake is getting from bad, then to worse, and now to even worse, even my updated views yesterday now look too optimistic

A few per cent of gross domestic product (GDP) of Japan will be knocked off in the quarters to come, no question about that.  While most natural disasters only had short-term impacts on the economy and it usually bounced back quickly, this might not be the case as judged from the severity of the disaster.  With the on-going nuclear crisis getting steadily worse, power supply has been cut off and power outages are now being scheduled.  With widespread damages in production facilities of various companies and infrastructure, the hope of a quick bounce back now looks slim.  As Japan has very little natural resources (including oil and coal), the closure of nuclear plants will only mean more imports of oil and gas.  BP’s figure shows that Japan’s oil and gas consumption each year accounted for about 5.1% and 3.0% of total world consumption, and all of them are imported (naturally).  But the impact on the actual commodities prices will be hard to predict as the situation now suggests a more severe impact on the global economy than initially thought (and we should not forget that Japan is the third largest economy after the United States and China).  The slowdown of global growth will mean downward pressure for commodities prices.

Trades will be disrupted in the quarters to come.  Japan is the second largest importer of Chinese goods and services (after the United States), with about 8.5% of China’s exports went to Japan in February (alternatively, 22.6% of Japan’s imports came from China in January).  Also, Japan’s share of China’s imports is the largest among all countries, with 12.3% of all imports coming from Japan in February (alternatively, 18.7% of Japan’s export went to China in January).  The collapse in bilateral trade will have negative impact on China, at least in short-term.  There is also a broader implication to Asia as a whole.  In 2009, 37% of Japan’s exports went to Asia ex. China, and 23% of imports were from other Asian countries ex. China.  The more-than-serious disruption in Japan’s economy and the expected long-road to recovery means a more sustained downward pressure on Japanese trades with other Asian countries, thus economic growth in Asia, which is now the key driver of global growth, can only be revised down in short-term.

The huge destruction of Japan will also mean the need for massive investments into infrastructure to rebuild the country.  With big private sector savings (and large corporate savings), private sector investments to rebuild the capital stocks will give the economy some boost.  Infrastructure will require investments from the government.  Unfortunately, the Japanese government is hugely in debt, with its gross debt stands at double of its GDP.  Although most Japanese government debts are held by Japanese (mainly Japanese companies), the government will find it harder to raise money to finance rebuilding as both the private and public sector use the savings to invest.  Another related point is that Japan has been making huge investments in other countries, particularly in Asia.  For instance, Japan is currently the third largest FDI equity investor in India in the latest financial year.  Japan’s outward foreign direct investments to Asia amounted to US$20.6 billion in 2009, which accounted for 28% of total outward foreign direct investments.  As the need for funds is now arguably larger back home, the slowdown of foreign investment will have a slightly negative impact on other Asian economies.

Many Asian economies have seen monetary tightening in the past few months as they fight with inflation. Some slight slowdown has been seen in China, and home prices in China are under pressure after series of tightening.  I expect the pace of tightening from various Asian countries to moderate as government and central banks will need more time to assess the impact of the collapse in trade and possible decrease of investments from Japan.

On the whole, this is a much more negative assessment of the situation.

See the original article >>

Will the Fed Finally Admit Inflation Is Rising?


When the Federal Reserve's interest-rate-setting committee meets on Tuesday to consider whether to change its monetary policy, it will likely be forced to alter the way it views the economy. It will probably rewrite its dismal assessment of unemployment, which has fallen, and acknowledge that the economy seems to be picking up. But will it also admit that the whiff of inflation is much stronger?

Prices for food and gasoline have lept in recent months, but they are not part of the key measure known as "core inflation," so the Fed tends to play down their impact. In his recent Congressional testimony, Fed Chairman Ben Bernanke said "the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in U.S. consumer price inflation."

Tell that to Bill Dudley, president of the New York Federal Reserve Bank, who was lambasted by a crowd in New York last week and angrily asked when he's last gone shopping.

Inflation Expectations Surge
In fact, the University of Michigan consumer confidence survey released on Friday shocked many economists. It said one-year inflation expectations had surged form 3.4% at the end of February to 4.6% in March.
"Bernanke has been saying inflation expectations are still falling, but they are absolutely not," says Rob Carnell, chief international economist at ING bank. "It is just not appropriate to have a super accommodative monetary policy when the economy is growing and inflation numbers are moving up."

There's no doubt that the economy is growing stronger, as reflected by the latest retails-sales report on Friday. Retail spending grew 1% in February, with auto sales -- which increased 2.3% -- providing the biggest boost, increasing 2.3% in the month.

Unemployment has declined to 8.9%, representing a drop of a full percent in only three months. The employment component of the ISM manufacturing index in February reached its highest level since 1973.

A Less Pessimistic Outlook

As a result of these improvements, the Fed is going to have to revise the glum outlook it gave at its last meeting in January, according to Troy Davig, senior U.S. economist for Barclays Capital.

"It's getting to the point where they are going to have to start changing their assessment and acknowledge some firming in consumer spending," Davig says. He added that the employment picture also has been improving rapidly, with the so-called diffusion index showing that companies are hiring more workers than they are laying off.

Both Davig and Carnell say they don't expect the Fed to change its existing zero-percent-interest-rate policy or to step back from its economic-stimulus program of buying $600 billion of Treasury bonds -- even though it adopted that policy when things looked much glummer.
The U.S. policy contrasts sharply with Europe's, which has warned it may start raising interest rates next month to stave off its inflation problem. The news has caused a huge realignment in currency rates, with the euro surging and the dollar falling.

Should the Fed End QE2?
Carnell claims the U.S. bond-buying program, known as quantitative easing, is doing as much harm as good and should end before its scheduled stop in June. "It's an irrelevant policy that's causing all sorts of distortions," he says, noting that it has caused a huge bout of inflation in places such as Brazil and China as investor funds leave the U.S. in search of higher returns.
But, reading between the lines, the Fed seems determined to continue with quantitative easing for the next few months, despite the economy's pickup, Davig says.

What remains unclear is what Bernanke plans to do with another program, announced last August, that calls for the Fed to use the interest it makes from the bonds it owns to buy new Treasuries, further stimulating the economy.

"What's going to happen to the reinvestment is less clear," Davig says, "A natural thing to do is freeze it."

At least if Bernanke rewrites his outlook, American consumers and companies will have a better fix on where things stand. That will help them make better spending decisions in the next few months.

See the original article >>

Nuclear Disaster Feared in Japan as Radiation Spreads

by Eric Talmadge and Shino Yuasa

Dangerous levels of radiation leaking from a crippled nuclear plant forced Japan to order 140,000 people to seal themselves indoors Tuesday after an explosion and a fire dramatically escalated the 4-day-old crisis spawned by a deadly tsunami.

In a nationally televised statement, Prime Minister Naoto Kan said radiation has spread from four reactors of the Fukushima Dai-ichi nuclear plant in Fukushima state, one of the hardest-hit in Friday's 9.0-magnitude earthquake and the ensuing tsunami that has killed more than 10,000 people, plunged millions into misery and pummeled the world's third-largest economy.

The International Atomic Energy Agency said Tuesday that Japanese officials told it that the reactor fire was in the storage pond - a pool where used nuclear fuel is kept cool - and that "radioactivity is being released directly into the atmosphere."

Though Kan and other officials urged calm, Tuesday's developments fueled a growing panic in Japan and around the world amid widespread uncertainty over what would happen next.

In the worst case scenario, the reactor's core would completely melt down, a disaster that would spew large amounts of radioactivity into the atmosphere.

Tokyo reported slightly elevated radiation levels, but officials said the increase was too small to threaten the 39 million people in and around the capital, about 170 miles (270 kilometers) away. Closer to the stricken nuclear complex, the streets in the coastal city of Soma were empty as the few residents who remained there heeded the government's warning to stay indoors.

Officials just south of Fukushima reported up to 100 times the normal levels of radiation Tuesday morning, Kyodo News agency reported. While those figures are worrying if there is prolonged exposure, they are far from fatal.

Kan and other officials warned there is danger of more leaks and told people living within 19 miles (30 kilometers) of the Fukushima Dai-ichi complex to stay indoors to avoid exposure that could make people sick.

"Please do not go outside. Please stay indoors. Please close windows and make your homes airtight," Chief Cabinet Secretary Yukio Edano told residents in the danger zone.

"These are figures that potentially affect health. There is no mistake about that," he said.

Weather forecasts for Fukushima were for snow and wind from the northeast Tuesday evening, blowing southwest toward Tokyo, then shifting and blowing west out to sea. That's important because it shows which direction a possible nuclear cloud might blow.

The nuclear crisis is the worst Japan has faced since the atomic bombing of Hiroshima and Nagasaki during World War II. It is also the first time that such a grave nuclear threat has been raised in the world since a nuclear power plant in Chernobyl, Ukraine exploded in 1986.

Some 70,000 people had already been evacuated from a 12-mile (20-kilometer) radius from the Dai-ichi complex. About 140,000 remain in the new warning zone.

Workers were desperately trying to stabilize three reactors at the power plant that exploded in the wake of Friday's quake and tsunami, after losing their ability to cool down and releasing some radiation. Since the quake, engineers have been injecting seawater into the reactors as a last-ditch coolant.

A fourth reactor that had been shut down before the quake caught fire Tuesday and more radiation was released, Edano said.

The fire was put out. Even though the fourth reactor was shut down, the fire there was believed to be the source of the elevated radiation.

"It is likely that the level of radiation increased sharply due to a fire at Unit 4," Edano said. "Now we are talking about levels that can damage human health. These are readings taken near the area where we believe the releases are happening. Far away, the levels should be lower."

Edano said another reactor whose containment building exploded Monday had not contributed greatly to the increased radiation.

Officials said 50 workers, all of them wearing protective radiation gear, were still trying to pump water into the reactors to cool them. They say 800 other staff were evacuated. The fires and explosions at the reactors have injured 15 workers and military personnel and exposed up to 190 people to elevated radiation.

In Tokyo, slightly higher-than-normal radiation levels were detected Tuesday but officials insisted there are no health dangers.

"The amount is extremely small, and it does not raise health concerns. It will not affect us," Takayuki Fujiki, a Tokyo government official said.

Kyodo reported that radiation levels nine times higher than normal were briefly detected in Kanagawa prefecture near Tokyo and that the Tokyo metropolitan government said it had detected a small amount of radioactive materials in the air.

Japanese government officials are being rightly cautious, said Donald Olander, professor emeritus of nuclear engineering at University of California at Berkeley. He believed even the heavily elevated levels of radiation around Dai-ichi are "not a health hazard." But without knowing specific dose levels, he said it was hard to make judgments.

"Right now it's worse than Three Mile Island," Olander said. But it's nowhere near the levels released during Chernobyl.

On Three Mile Island, the radiation leak was held inside the containment shell - thick concrete armor around the reactor. The Chernobyl reactor had no shell and was also operational when the disaster struck. The Japanese reactors automatically shut down when the quake hit and are encased in containment shells.

Olander said encasing the reactors in a concrete sarcophagus - the last-ditch effort done in Chernobyl - is far too premature. Operators need to wait until they cool more, or risk making the situation even worse.

The death toll from last week's earthquake and tsunami jumped Tuesday as police confirmed the number killed had topped 2,400, though that grim news was overshadowed by a deepening nuclear crisis. Officials have said previously that at least 10,000 people may have died in Miyagi province alone.

Millions of people spent a fourth night with little food, water or heating in near-freezing temperatures as they dealt with the loss of homes and loved ones. Asia's richest country hasn't seen such hardship since World War II.

Hajime Sato, a government official in Iwate prefecture, one of the hardest-hit, said deliveries of supplies were only 10 percent of what is needed. Body bags and coffins were running so short that the government may turn to foreign funeral homes for help, he said.

Though Japanese officials have refused to speculate on the death toll, Indonesian geologist Hery Harjono, who dealt with the 2004 Asian tsunami, said it would be "a miracle really if it turns out to be less than 10,000" dead.

The 2004 tsunami killed 230,000 people - of which only 184,000 bodies were found.

The impact of the earthquake and tsunami dragged down stock markets. The benchmark Nikkei 225 stock average plunged for a second day Tuesday, nose-diving more than 10 percent to close at 8,605.15 while the broader Topix lost more than 8 percent.

To lessen the damage, Japan's central bank made two cash injections totaling 8 trillion yen ($98 billion) Tuesday into the money markets after pumping in $184 billion on Monday.

Initial estimates put repair costs in the tens of billions of dollars, costs that would likely add to a massive public debt that, at 200 percent of gross domestic product, is the biggest among industrialized nations.

Yuta Tadano, a 20-year-old pump technician at the Fukushima plant, said he was in the complex when quake hit.

"It was terrible. The desks were thrown around and the tables too. The walls started to crumble around us and there was dust everywhere. The roof began to collapse.

"We got outside and confirmed everyone was safe . Then we got out of there. We had no time to be tested for radioactive exposure. I still haven't been tested," Tadano told The Associated Press at an evacuation center.

"I worry a lot about fallout. If we could see it we could escape, but we can't," said Tadano, cradling his 4-month-old baby, Shoma.

The Dai-ichi plant is the most severely affected of three nuclear complexes that were declared emergencies after suffering damage in Friday's quake and tsunami, raising questions about the safety of such plants in coastal areas near fault lines and adding to global jitters over the industry.

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GE shares slump 9% in premarket trading

By Simon Kennedy

Shares in General Electric Co. (GE 19.92, -0.44, -2.16%)  slumped 9% in premarket trading Tuesday as the situation at Japan's Fukushima Daiichi nuclear power plant worsened. GE designed the reactors used at the plant, where there has been a "substantial" radiation leak, according to Japanese Prime Minister Naoto Kan. The Wall Street Journal reported late Monday that GE is ready to offer technical assistant to the Japanese government and has has kept engineers on standby in a Wilmington, N.C., command center. Shares in GE fell 2.2% on Monday

Radiation level rises slightly in Russia's Far East

(Reuters) - Radiation levels rose slightly in Russia's Far East on Tuesday but stayed within normal levels, officials said, as Japan struggled to cope with the worst nuclear accident since the 1986 Chernobyl disaster.

Radiation levels in Vladivostok, a city of 600,000 people some 800 km (500 miles) northwest of Japan's Fukushima nuclear plant, were 1 microroentgen per hour higher at 0400 GMT (12 a.m. ET) than six hours previously, the regional emergencies ministry said.

Russia's military said it was on alert to evacuate people if required from Russia's Sakhalin island, whose southernmost tip is visible from northern Japan, and the Southern Kuril island chain which is at the heart of a territorial dispute with Japan, Interfax news agency reported.

Called the Northern Territories by Japan, the Southern Kuril islands are inhabited by Russians and one of the islands, Tanfilyeva, is just 6 km (4 miles) from Japan's coast.

Sakhalin island holds Russia's biggest proven gas reserves in the Far East.

Japan warned radiation levels had become "significantly" higher around a quake-stricken nuclear power plant after explosions at two reactors.

But the Emergency Ministry for Russia's Far East, a large swathe of Russia home to 6.5 million people which faces Japan to its east, said it expected the winds to change in their favor.

"Eastern winds will blow for the next several days, and the air flows (from the pollution area) will move over the Pacific Ocean, away from the Russian Far Eastern coast," said ministry spokeswoman Yekaterina Potvorova.

She said radiation was being monitored across 71 sites in the Far East. Russian flagship airline Aeroflot would continue direct flights as normal to Tokyo, a spokeswoman said.

Japanese Prime Minister Naoto Kan urged people within 30 km (18 miles) of the facility north of Tokyo to remain indoors and conserve power, underscoring the dramatic escalation of Japan's nuclear crisis, the world's most serious since Soviet Ukraine's Chernobyl in 1986.

Europe losses accelerate; Germany's DAX 30 off nearly 4%, leading regional decliners

By Barbara Kollmeyer

European stock markets tumbled on Tuesday as panic selling swept across Tokyo after another explosion at a troubled nuclear plant and comments from Japanese Prime Minister Naoto Kan about radiation leaks.

The Stoxx Europe 600 index (ST:STOXX600 265.33, -7.18, -2.64%)  fell 1.8% to 267.60 in early trading, with losses widespread across the financial, oil, mining and utility sectors.

In Paris, French nuclear engineering group Areva SA (FR:CEI 28.82, -2.69, -8.54%)  fell 7.1%. German utility E.On AG (DE:EOAN 21.02, -0.64, -2.93%)  dropped 3.8%, the biggest loser on the German DAX 30 index (DX:DAX 6,621, -245.79, -3.58%) , which was off 2.6%.

In Japan, after plunging 14% at one point, the Nikkei Stock Average (JP:NI225 8,605, -1,015, -10.55%)  finished 10.6% lower, its biggest decline since 2008. The latest sell-off, came after an explosion Tuesday at the troubled Fukushima Daiichi plant’s No. 2 reactor, on top of previous explosions at No. 1 and No. 3 reactors.

Prime Minister Kan said “substantial amounts of radiation are leaking in the area.”

Among other indexes in Europe, France’s CAC 40 index (FR:PX1 3,773, -104.70, -2.70%)  fell 2.2% to 3,792.02, with utility Electricite de France SA (FR:EDF 27.85, -1.12, -3.87%)  down 3.2%.

Luxury-goods makers, which have a sizeable clientele in Japan, continued to tumble. LVMH Moet Hennessy Louis Vuitton SA (FR:MC 101.05, -5.45, -5.11%)  sank 3.2%.

Shares of U.K. luxury-goods firm Burberry Group PLC (UK:BRBY 1,052, -70.00, -6.23%)  fell 4.1%, helping to drag the FTSE 100 index (UK:UKX 5,654, -120.94, -2.09%)  down 1.2%. Miners also fell across the board, with Fresnillo PLC (UK:FRES 1,415, -84.00, -5.60%)  off 3.4% and Eurasian Natural Resources Corp. PLC (UK:ENRC 849.50, -54.50, -6.03%)  down 4%.

U.S. stock futures were pointing to a sharply lower open as well, with futures for
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Dow futures slide nearly 200 points as Japan's nuclear crisis intensifies

By Nick Godt and Simon Kennedy

U.S. stock futures fell sharply on Tuesday after Japan’s Nikkei Average tumbled nearly 11% amid reports that radiation was leaking from a nuclear plant hit by Friday’s earthquake and tsunami.

Futures for the Dow Jones Industrial Average (DJM11 11,757, -169.00, -1.42%)  were down 161 points, or 1.4%, at 11,765.00 and futures on the Standard and Poor’s 500 index (SPM11 1,263, -27.40, -2.12%)  fell 20 points, or 1.6%, to 1,270.40.

Nasdaq 100 future (NDM11 2,243, -46.50, -2.03%)  were down 32.75 points, or 1.4%, at 2,256.75.

Nuclear risk rises in Japan
Confusion and panic levels are rising across Japan following another blast and fire in Fukushima.

Dow futures earlier fell as low as 11,611 following two more explosions Tuesday at the Fukushima Daiichi nuclear-power plant, at the No. 4 and No.2 reactors, with the latter leading to a sharp rise in radiation levels.Read more on Japan’s nuclear crisis.

Futures recovered slightly from their lows as Japanese media reported that the fire at reactor No. 4 had been put out, citing Tokyo Electric Power Co. (JP:9501 1,221, -400.00, -24.68%) .

The Nikkei Stock Average (JP:NI225 8,605, -1,015, -10.55%)  plunged more than 14% at one point in afternoon trade before recovering slightly to end down 10.6% — its worst drop since 2008. The fall came on top of Monday’s 6.2% tumble. Read more on the Nikkei’s slide.

In other Asian markets, Hong Kong’s Hang Seng index (HK:HANGSENG 22,678, -667.63, -2.86%)  closed down 2.6% and South Korea’s Kospi (XX:$SEU 1,924, -47.31, -2.40%)  fell 2.4%

European stock markets also dropped sharply in early trading, with the Stoxx Europe 600 index (ST:STOXX600 264.95, -7.56, -2.77%)  falling 1.6% and Germany’s DAX 30 index (DX:DAX 6,610, -256.69, -3.74%)  dropping 2.2%.

Nymex crude-oil futures also fell over 1% in electronic trading. Light crude for April delivery was down $1.30 at $99.89 a barrel on Globex. Read more on oil.

The dollar fell against the yen, with analysts citing support for the Japanese currency from domestic retail and institutional investors reducing their risk exposure. Read more about the yen.

U.S. markets also await a monetary-policy meeting by the Federal Reserve on Tuesday.

“With the recovery in the U.S. economy still very vulnerable to external shocks such as the spike in oil prices and the earthquake in Japan, the Federal Reserve will most likely err on the sound caution by providing minimal clues on where they stand on monetary policy,” said Kathy Lien, director of currency research at GFTForex, in a note.

Stronger rupee helps gold

by Shivom Seth

A strong rupee has kick-started gold buying in India, the world's largest consumer, despite prices inching closer to the $466 mark for 10 grams. Traders also stocked up on the yellow metal ahead of next week's spring festival, Gudhi Padwa.

With the country's central bank, the Reserve Bank of India widely expected to continue its rate tightening cycle and raise policy rates by a quarter of a percent on March 17, traders are gearing up for a tough road ahead.

``If it does hike rates, it will be for the eighth time in about a year, amidst strong growth momentum in the country and in a bid to tame inflation,,'' said bullion retailer Bhaidas Shah.

He added that gold demand in the country had improved the past week slightly on the back of a stronger rupee. Dealers are expecting that more falls could trigger further buying as people expect the yellow metal to soar.

``Most consumers come in saying they expect gold to extend beyond $1,410 an ounce very soon given the conditions in Japan. A strong rupee is also prompting physical traders to stock for the wedding season ahead,'' said currency and bullion dealer Sevantilal Mehta.

The Indian rupee has witnessed slight appreciation over the past ten days against the US dollar. Market indications suggest that the Indian currency is expected to be valued lower against the US dollar in the near and medium term due to political risks and high inflation.

In a research note, the Standard Charted Bank has said that the Indian rupee will not see sustained appreciation against the US dollar. Standard Chartered expects the US dollar against Indian rupee exchange to be 46.2 by the end of the first half of 2011, from the earlier projection of 45.8.

In the near term, the research note said, positioning and neutral forex valuations may continue to pressure the rupee.

All of this might not be sweet music to gold traders, but India's gold-for-oil plan suggests a firmer price in the immediate term. The Indian government is considering settling payments to Iran with gold in a bid to ensure steady crude oil supplies from Iran. Most traders are of the opinion that the gold price is bound to remain firm.

India's crude oil imports from Iran had come to a halt after the Reserve Bank of India declared that a regional clearinghouse that involved the Iranian central bank could no longer be used to settle oil and gas transactions between the two countries.

India imports 80% of the 184 million tonne of crude oil it refines every year. Iran accounts for 16% of these purchases. Officials have said that India could settle crude oil import transactions using gold in the short term, even as efforts continue to resolve the deadlock.

Corn and Soybean Prices: Mission Accomplished?

by Phyllis Picklesimer

In the Jan. 18 Weekly Outlook, it was suggested that corn and soybean prices had the dual objectives of
(1) allocating old-crop supplies so as to maintain pipeline supplies at the end of the year
(2) directing spring planting decisions.
"Specifically, these prices needed to ensure an increase in corn acreage and maintain soybean acreage at the 2010 level," said University of Illinois economist Darrel Good.
For soybeans, the declining pace of both the domestic crush and exports, along with the prospects for a large increase in double-cropped acreage in 2011, suggested that soybean prices had increased enough by mid-January to accomplish the dual price objectives.
"That conclusion was reinforced by the improving condition of the Brazilian soybean crop and prospects for a record harvest in 2011. The USDA confirmed prospects for a record large Brazilian soybean crop last week," he said.
Soybean prices increased another 40 cents from Jan. 18 to the peak on Feb. 9. Since then, May 2011 soybean futures have declined about $1.30. The decline in November 2011 futures has been only slightly less, he said.
"For corn, the conclusion in mid-January was that prices would need to remain very strong to slow the pace of consumption and to motivate a large increase in planted acreage," Good noted.
May 2011 corn futures increased nearly 60 cents from Jan. 18 to the peak on March 4. December 2011 futures increased about 40 cents to the much earlier peak on Feb. 11, he said.
"Corn prices have declined sharply since early March and are now back to the level of mid-January. The rapid decline suggests the market believes that corn prices have accomplished their objectives. The likelihood that old crop consumption has been slowed enough comes from two perspectives," he said.
First is the macro-perspective. Recent world events are seen as a threat to the fragile economic recovery that is under way. Political unrest in North Africa and the Middle East has pushed crude oil and gasoline prices nearly 15 percent higher in the past month. Those higher prices could slow economic growth and curb commodity demand, including demand for agricultural commodities, he noted.
"Now the devastating earthquake and tsunami in Japan may challenge the Japanese and world economies, pointing to the possibility of a further slowdown in global demand growth," he said.
The second perspective of corn demand comes from the flow of information relative to the pace of consumption. During the first half of the 2010-11 marketing year, ethanol production, and presumably the amount of corn used for ethanol production, was 15 percent larger than during the same period last year, Good said.
"Last year, however, ethanol production was relatively small during the first half of the corn marketing year and accelerated rapidly in the last half of the year. Year-over-year increases in ethanol production will be much smaller for the last half of the 2010-11 marketing year. Still, use during that period needs to be only 2.3 percent larger than use of a year ago to reach the USDA projection of 4.95 billion bushels of corn used for ethanol production," he said.
The pace of corn exports has also been slow enough that the USDA projection of marketing-year exports of 1.95 billion bushels is not expected to be exceeded. Although the pace of corn export sales accelerated during the five weeks ended Feb. 24, the pace of shipments remains generally slow. Cumulative marketing-year export inspections through March 10 were about 10 million bushels less than the total of a year ago, he said.
"In addition, Census Bureau estimates of corn exports through January were only 26 million bushels larger than cumulative inspections. Last year, census estimates through January exceeded inspections by 63 million bushels," he said.
Like last year, exports will have to increase rapidly in the last half of the year in order to reach the USDA projection for the year. That pace may now be threatened by the situation in Japan, although not much is known about damage to total port capacity, transportation infrastructure, or the livestock industry. Japan is the largest importer of U.S. corn, and as of March 3, 116 million bushels of corn sales to Japan had not been shipped, he noted.
"Finally, corn prices have been pushed lower by ideas that producers have already made plans for a large increase in corn acreage in 2011. Some are projecting planted acreage above the USDA expectation of 92 million acres and even above our calculation of a needed 93 million acres. These expectations of large corn acreage underscore the importance of the USDA's March 31 Prospective Plantings report," he said.

Gold and Silver Price, Beware What You Read!

It has become a media tradition for moves in the gold price to be related to some political event or a civil war or a major tragedy such as the earthquake in Japan, when the events have a negligible effect on those markets. We find it unfortunate that this happens because it is misleading. For instance, this morning we were informed that the gold price had risen in the dollar, because of Japan's earthquake and tsunami. In fact it was almost entirely accounted for by the fall in the dollar against the euro. The gold price shows its market movements most clearly in the euro, not in the U.S. dollar. A glance across the euro gold price of the last week reinforces that statement, whereas the gold price in the dollar clearly shows the movements in the euro plus the moves of the U.S. dollar against the euro.

This piece looks at some of the worst of the misleading statements that may confuse or misdirect gold and silver investors, should they add credence to these statements. It also looks at what pieces of news will move gold and silver prices.

What does not affect the gold and silver prices?

Investors should stop for a moment when they read a headline attributed to affecting the gold price and ask, "what investors will go into the gold market, sell his currency and buy or sell gold or silver, because of a demonstration in the Yemen, or a bomb in Bali?" How will that event feed through to cause this unrelated market to react to such news through the buying or selling of that metal? The event must initially cause a financial ripple causing uncertainty globally or instability, to the extent that it will affect the global centers of finance. No matter what sympathies one may or may not have with the cause involve, unless they feed through to global financial markets, they will not cause an investor to buy or sell any unrelated financial product.

Today, in Japan, the company that owns the nuclear reactors is down 23% in price. Companies that make cars and rely on the power company for power are down 6%+ , because they have closed down. This identifies clearly how the ripple of disaster will cause those companies in losses. Thus the damage is priced in reasonably. However, does Japan's disaster affect the Dow Jones or the FTSE or the CAC40? No, of course not, so why should it affect the gold and silver prices? This is what you the investor must filter out.

How could Japan's disaster affect the gold and silver prices? To the extent the disaster affects the value of the Yen in international markets, yes, it may prompt investors to place some Yen investments into gold, but we believe this will depend on the impact the additional liquidity the Bank of Japan has pumped into the markets and its cheapening affect on the Yen, more than the disaster itself. It sounds callous, but sad to say money has little emotion if any.

What news does affect the gold and silver prices?

  • The U.S. dollar exchange rate moves against the euro produce an almost immediate change in the dollar gold price. The same will apply to the gold price in local currencies against the dollar and in turn the euro. This is because the market records real changes in gold prices in the euro not in the U.S. dollar.
  • The same is true of gold prices in any other currency, although they tend to reflect the change against the U.S. dollar, which then moves against the euro.
  • Many used to believe that the oil price was a gold price determinant, until the oil price popped its cork and ran up to $145 in 2007. It was then realized that the oil price, insofar as it measured instability or uncertainty, affected the gold price, but not in a direct, fixed ratio. Of course, had the demonstrations in Egypt led to the closure of the Suez Canal, an oil crisis across the globe would have been precipitated. Riots in Yemen, where there is no significant oil will not affect the oil price, nor precious metals. But if the riots in Bahrain affect oil production there, or lead to them crossing the causeway into Saudi Arabia and led to a cut in oil production there, then there would be a global oil crisis and all global financial markets would react strongly. This is because of the volume of oil that could not be produced and the ripple through to the global economy. The precious metal prices would then soar for as long as the crisis remained unresolved.
  • Should high oil prices persist and not simply be a 'spike', then they will heavily impact inflation worldwide. This will cause gold and silver to rise as money cheapens.
  • The switch from the pricing of oil from only the dollar to any currency or even a basket of selected currencies would undermine the U.S. dollar in the monetary world and lead to a strong upward rise in the gold and silver prices.
  • A significant purchase of gold by a signatory of the Central Bank European Gold Agreement would change the world's perspective on gold in the monetary system.
  • Any news that directly affects the structure of the global monetary system would have a rapid and deep impact on precious metal prices.
  • Confirmation of the decay in the global monetary system [such as a failure of Ireland to renegotiate its 'bailout' terms] would indicate that Irish debt would have no market and threaten the stability of the Eurozone. This would prompt precious metal buying to escape the damaging impact on the euro and on the future of the global monetary system.
  • China selling U.S. Treasuries on a persistent ongoing basis would do the same as this would directly indicate the slow demise of the U.S. dollar as a credible global reserve currency.
  • As to day to day news, much as it may make an appealing story, most supposed drivers of day to day gold and silver prices do not drive people to buy gold or silver.
In the Far East the emerging [India, China, etc] more than the developed nations[Japan ] look at gold and silver as financial security, some way above government or bank investments or equity investments. There, the ongoing realization that gold and silver are real money, drive gold and silver markets more than any sudden event.

However, there are times when an investor may rely on the emotional appeal of a piece of news rush into the gold market only to find the market did not react subsequently. The media are there to 'sell' stories, but investors have to discern the impact if they are to maximize profits. Here's to successful investing!

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