So much for the non event from chairman Bernanke. The story goes on, inflation is a fact, although Fed doesn’t want to see it. Oil spiking, Gold new highs and the Usd is soon gone.

Vix, the ex fear index, according to many that have never traded options, is up 3% today. What if this is implying some caution going forward, or can stocks never go down?

“Faced with largely the same set of facts when it comes to their inflation outlook, some of the world’s major central banks have come to markedly different conclusions about the appropriate policy.

 The ECB began to exit from its accommodative policy by increasing its policy rate by 25 basis points to 1.25% on April 7. The ECB noted that growth was improving moderately, but inflation had increased to 2.6% and was up from 2.45% the previous month. The rise was largely due to increases in energy, food, and commodity prices. The concern was the potential second round effects and that these increases could become embedded in inflation expectations.

 The same day, the Bank of England kept its policy rate at 0.5%, despite the fact that inflation had been running well above its target rate of 2% for more than a year and was likely to remain so through 2011. Again, the Committee noted that the near term path for inflation was higher due to energy, imported commodities and other goods. Concern was also expressed about inflation expectations having risen in the UK, the US and the euro area relative to what they had been before the financial crisis. Finally the UK real economy was softer than that of the EU generally with output having declined by 0.5% in the fourth quarter of 2010.

 While the FOMC will meet this week, Fed Chairman Ben Bernanke and Vice-Chair Janet Yellen have already signaled that they view the recent increases in commodity, energy and food prices as transitory. Governor Yellen in particular provided an extremely thorough and detailed dissection of the inflation data and her views on the real economy and employment in her April 11th speech in New York. She indicated clearly that the causes of the run-up in food, energy and commodity prices were rooted in increases in global demand, combined with energy supply shocks and uncertainty about oil flow from the Middle East. Like the Chairman, she expressed the view that the increases were transitory. Most notably she attempted to debunk the widely discussed view that accommodative policies in the US were the cause of the increase in global prices. She was very clear that the main concern was for the US expansion and employment situation, that the current stance of policy was appropriate, and that QE II would be completed as scheduled. So we don’t expect any notable news coming from this week’s FOMC meeting.” (IRA)

Full article,

http://us1.institutionalriskanalytics.com/pub/IRAMain.asp

Five bullet points from the letter sent to Mr Geithner yesterday by the Treasury Borrowing Advisory Commitee. The commitee consists of people from MS, GS, Soros, PIMCO etc….

First, foreign investors, who hold nearly half of outstanding Treasury debt, could reduce their purchases of Treasuries on a permanent basis, and potentially even sell some of their existing holdings. A sustained 50 basis point increase in Treasury rates would eventually cost U.S. taxpayers an additional $75 billion each year.

Second, a default by the U.S. Treasury, or even an extended delay in raising the debt ceiling, could lead to a downgrade of the U.S. sovereign credit rating

Third, the financial crisis you warned of in your April 4th Letter to Congress could trigger a run on money market funds, as was the case in September 2008 after the Lehman failure

Fourth, a Treasury default could severely disrupt the $4 trillion Treasury financing market, which could sharply raise borrowing rates for some market participants and possibly lead to another acute deleveraging event.

Fifth, the rise in borrowing costs and contraction of credit that would occur as a result of this deleveraging event would have damaging consequences for the still-fragile recovery of our economy.

Finally, I would emphasize that because the long-term risks from a default are so large, a prolonged delay in raising the debt ceiling may negatively impact markets well before a default actually occurs.

Full letter;

geithner letter

“As he has explained many times, the Fed has alternatives. It could announce that it would keep its benchmark rate at zero for a few years, which would probably hold down long-term rates. It could say that it was comfortable with higher inflation for a limited period of time, given how low inflation has been since 2007 and how high unemployment is. Above all, Mr. Bernanke could make clear that he considers years of widespread unemployment to be unacceptable.

He has not done so, and he has yet to offer a satisfying rationale.

Instead, he has said that more aggressive action brings risks. And it does. Low interest rates have the potential to spark inflation, by enticing millions of households and businesses to borrow money and causing the economy to overheat. Higher inflation could, among other things, increase borrowing rates for the United States government and worsen the deficit.” (NYT)

http://www.nytimes.com/2011/04/27/business/27leonhardt.html?_r=2&ref=business

All eyes on Bernanke today, although he will probably not say anything unexpected. Meanwhile the dollar plunge is continuing, with the fiat now hitting 3 year lows. All those upticks in SPX handles, have been largely offset by the Usd. The SPX looks somewhat different, adjusted for the Usd decline.

We have been reporting extensively on the Fukushima/TEPCO situation. Denial, lack of critical thinking and a “stoic and quiet” society are all ingredients to the total failure of Fukushima. The leaders have all been bowing for some time, wishfully trying to play down the disaster. The rest of the world seem to already have forgotten the Fukushima disaster, but the aftermaths will haunt the Japanese society for many years.

“Despite a new law shielding whistle-blowers, the regulator, the Nuclear and Industrial Safety Agency, divulged Mr. Sugaoka’s identity to Tokyo Electric, effectively blackballing him from the industry. Instead of immediately deploying its own investigators to Daiichi, the agency instructed the company to inspect its own reactors. Regulators allowed the company to keep operating its reactors for the next two years even though, an investigation ultimately revealed, its executives had actually hidden other, far more serious problems, including cracks in the shrouds that cover reactor cores.

Just as in any Japanese village, the like-minded — nuclear industry officials, bureaucrats, politicians and scientists — have prospered by rewarding one another with construction projects, lucrative positions, and political, financial and regulatory support. The few openly skeptical of nuclear power’s safety become village outcasts, losing out on promotions and backing.” (NYT)

http://www.nytimes.com/2011/04/27/world/asia/27collusion.html?pagewanted=1&_r=1&hp

http://www.nytimes.com/interactive/2011/03/16/world/asia/reactors-status.html?ref=asia

STUTTGART, Germany – German drivers were left stunned Tuesday after a gas station was caught charging €9.99 ($14.59) per liter in a bid to stop customers from filling up.

The station was running low amid a nationwide shortage due to Easter traffic and a holiday ban on fuel tankers.

Police were called to the Esso gas station near Stuttgart late Monday after it raised the price — equivalent to $40 a gallon — in a deliberate move to deter motorists, German news website The Local reported.

Several customers filled up without noticing the hike, despite warning signs on the pump not to do so, German newspaper Bild reported. One customer told Bild he put 21 litres in his BMW and was asked to pay €209.98.

“I didn’t pay attention to the price. Who expects something like that? Nearly €10 for one litre? It’s a swindle,” Yunus G. said.

Customers slugged with the staggering bills called police, but were told they needed to pay. The gas station had done nothing wrong, police said, because the price was determined by head office.

The drivers eventually paid for their gas, but were hoping to sort out a compromise with Esso Tuesday.

Read more: http://www.myfoxdc.com/dpp/news/offbeat/german-gas-station-charges-40-a-gallon-to-deter-customers-042611#ixzz1KiJi20zs

The mania for silver has spread to the stock market as day traders pile into the buying.

Trading got so heated during the past two days that shares traded in the iShares Silver Trust, the biggest exchange-traded fund tracking the price of silver, topped that of the SPDR S&P 500 ETF, usually one of the most actively traded securities in the world.

Day traders “are going crazy,” says Joseph Saluzzi, co-head of trading at brokerage firm Themis Trading. “It’s typical of the bubbly speculation that’s been going on in silver.”

On Monday, trading in the silver ETF was especially heavy, …

http://online.wsj.com/article/SB10001424052748704729304576287474228291628.html?mod=WSJ_Markets_LeadStory