3/15/11…nuclear meltdown?

…or as Dubya would say, “nucular.” As TB prepares to leave for the airport to fly back to Minneapolis, all hell is breaking loose in the financial markets as investors struggle to attain liquidity and don’t forget that Friday is options expiry! Also the VIX and VXN are done with their complacency and hovering at their respective 200 day moving averages…but will likely have a huge gap up on the open!

Keep options expiry in mind along with the low volume of the past 3 days…all around 900 million shares or more than 200 million below average. Next consider the warning from Robert Schiller yesterday that following the Chernobyl and Three Mile Island incidents it took a week for the markets to fully react. In Japan we have at least two reactors flooded with seawater and there have been two explosions – fuel rods are exposed and thus leaking some radiation with fears of much worse. All of this comes on top of a market that was ‘toppy’ at best. Consider that Barron’s a week earlier was still bullish, then decidedly negative in the latest edition (aside from a few stocks that they labeled capable of 20-40% gains…despite the toppy market???). It is for the above reasons that TB suggested trailing stops with limits, but the events of last night make outright sells somewhat appropriate depending on the stocks, amount of gain/loss, and investor pain tolerances.

First, on Friday, the Nikkei closed down 1.2%, but little of the impact was known before the close due to the location in the far northwest. Then on Monday it gapped down on the open and closed -6.2%. Last night it again gapped down and closed -10.6% – imagine if this happened in the U.S. Now recall TB’s warning on the population there 60+ years old rising sharply as the savings rate plunged and is (was?) about to turn negative. Then TB‘s admonition that having to fund their debt in the outside market would raise the yield at least from 1.3% to 3.5% – a decline in value of over 19%. Then along came the quake/tsunami and the die is cast. Not only were people selling or letting their bonds mature, they now have huge material losses and have to sell more…just as the government is faced with a huge job of financing a recovery! Bad for them but also for the other big debtor nations: U.S., U.K., Italy, Spain, and the lesser Ireland, Portugal, and Greece. This could force a major double-dip back to recession – globally!

Here is what else happened overnight (6am PDT):
Stocks: FTSE -2%; CAC40 -3.1%; DAX -4%; Hang Seng -2.9%; Korea -2.4%; India -1.5%, and in futures DOW -270!; SPX -35!; NDQ – 69! …all continuing to fall!
Bonds: U.S. 30 yr 4.44% +1-5/8; 10 yr 3.23% +1-1/16; Japan 10yr -1/8; Europe +½ – 13/16
GOLD: $1386 -$38.10! This despite the dollar still below 77; Crude $97.45 -$3.72! But will gas prices at the pump fall as well! NO! That is speculation for you on both of these commodities!

– – –  . . .  – – –   – – –  . . .  – – –  Double SOS!!!

TB is nearly finished with All the Devils are Here! He has now found the answer why no one is in jail. It would be too embarrassing to our esteemed Congresmen, Senators, both political parties and the regulators who let it happen on their watch, most notably Alan Greenspan and Ben Bernanke (who cannot be excused as he wrote the scathing study on how the Fed exacerbated the Great Depression…or turned it into one from a deep recession). When we reach that realization it becomes crystal clear that so many accepted the regulators charges, without admitting guilt of course, but paying huge mostly undisclosed amounts (we know Goldamn settled for $550 million, destroyed their reputation, but made billions, as did Angelo Mozillo who paid $55 million which was probably less than his legal fees. In addition, dozens of others settled with the SEC without details being provided). We are in a sick society and history shows that sick societies are punished…not by God (TB is not one of those Christian fanatics), but by imploding from within.

It is for this reason that TB again pleads that you all change your voter registration from Democrat or Republican to ‘no affiliation.” It is far later than we think and this is the one tool we have to promulgate change, without it we, as a nation are sunk…it will be business as usual.

Hope you all have a great day! Writing from Minnesota tomorrow!

TB

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