The Big Picture

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• What Are the Risks for Pacific Coast Residents from Fukushima Radiation?
• 10 Monday PM Reads
• Top Reddit Posts
• Debunking the Bear Case
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• The Innumeracy of the Media Has Not Been Greatly Exaggerated
• Media Hall of Shame: Black Friday Reporting
• 60 Minutes: The Future of Amazon
• Sarkar: Monthly report – November

What Are the Risks for Pacific Coast Residents from Fukushima Radiation? Posted: 02 Dec 2013 10:30 PM PST "[The Odds of] Longer Term Chronic Effects, Cancer Or Genetic Effects … Cannot Be Said To Be Zero" It is very difficult to obtain accurate information on the dangers from Fukushima radiation to residents of the West Coast of North America and Hawaii. On the one hand, there is fear-mongering and "we're all going to die" type hysteria. On the one hand, there is a tendency for governments to cover up the truth to avoid panic and deflect blame for bad policy. Japan is poised to pass a bill which would outlaw most reporting on Fukushima. And the U.S. government is not even monitoring radiation levels in the waters off the U.S. coast. As the Cape Cod Times reports: With the first plume of water carrying radionuclides from Fukushima due to hit the U.S. West Coast any day now, [the senior scientist at the Woods Hole Oceanographic Institution, Ken Buesseler's] latest project is to convince the federal government to monitor radiation levels in the sea water. "We don't have a U.S. agency responsible for radiation in the ocean," Buesseler said. "It's really bizarre." *** He spent this past week in Washington, D.C., meeting with representatives of the Nuclear Regulatory Commission and the Department of Energy, asking them to come up with some sort of plan to keep tabs on levels of radionuclides in the ocean. Buesseler also talked with U.S. Sen. Edward Markey, D-Mass., who agreed the federal government has a role in making sure the oceans are healthy and safe. But Markey said in an email that an increased federal role is not likely [because of budget cuts]. Indeed, Dr. Buesseler points out the circular reasoning which the government is using (at 10:00): I completely agree that no radiation has been seen in the regards that we're not really testing for it [laughter] in any organized way … We have very few data; it's not really being organized. The government says we don't really need to do that because we're predicting very low levels. On the other hand, you could argue I'd very much like to see study on our side of the ocean just to confirm these values and build some confidence with the public that's been concerned about this. They're right to be concerned — as scientists we're telling them they shouldn't be, but it'd be nice to have a few more data points to fill that gap … I've been told that there's very little testing going on. People are certainly concerned. As the Wall Street Journal notes: Water containing radioactive materials has been leaking from storage tanks and drains at the plant into groundwater and the nearby ocean, raising concerns across the world that currents might spread radioactivity to faraway places. But people don't know where to get accurate information on the risks involved. This essay provides reliable information on what is really going on … based upon the known science. It's divided into 3 sections: I. Is Low-Level Radiation Dangerous … Or Harmless? II. How Much Radiation Will We Be Exposed To? III. How Can We Protect Ourselves from Radiation? I. Is Low-Level Radiation Dangerous … Or Harmless? You may have heard different claims about whether low-level radiation is dangerous … or harmless. Fox News reports: Doug Dasher, who [teaches] radioecology at the University of Alaska Fairbanks, said it remains possible that there will be minor effects for people on the U.S. West Coast, despite the low test results. "No acute effects resulting in mortality or damage to organs … would be expected," he told FoxNews.com. But he added that more subtle effects might occur. "Longer term chronic effects, cancer or genetic effects… odds are statistically low, if the concentrations in the models remain within the projections, [but] cannot be said to be zero." What is Dasher saying? That even low levels of radiation from Fukushima can increase the risk of cancer and other diseases. A major 2012 scientific study proves that low-level radiation can cause huge health problems. Science Daily reports: Even the very lowest levels of radiation are harmful to life, scientists have concluded in the Cambridge Philosophical Society's journal Biological Reviews. Reporting the results of a wide-ranging analysis of 46 peer-reviewed studies published over the past 40 years, researchers from the University of South Carolina and the University of Paris-Sud found that variation in low-level, natural background radiation was found to have small, but highly statistically significant, negative effects on DNA as well as several measures of health. The review is a meta-analysis of studies of locations around the globe …. "Pooling across multiple studies, in multiple areas, and in a rigorous statistical manner provides a tool to really get at these questions about low-level radiation." Mousseau and co-author Anders Møller of the University of Paris-Sud combed the scientific literature, examining more than 5,000 papers involving natural background radiation that were narrowed to 46 for quantitative comparison. The selected studies all examined both a control group and a more highly irradiated population and quantified the size of the radiation levels for each. Each paper also reported test statistics that allowed direct comparison between the studies. The organisms studied included plants and animals, but had a large preponderance of human subjects. Each study examined one or more possible effects of radiation, such as DNA damage measured in the lab, prevalence of a disease such as Down's Syndrome, or the sex ratio produced in offspring. For each effect, a statistical algorithm was used to generate a single value, the effect size, which could be compared across all the studies. The scientists reported significant negative effects in a range of categories, including immunology, physiology, mutation and disease occurrence. The frequency of negative effects was beyond that of random chance. *** "When you do the meta-analysis, you do see significant negative effects." "It also provides evidence that there is no threshold below which there are no effects of radiation," he added. "A theory that has been batted around a lot over the last couple of decades is the idea that is there a threshold of exposure below which there are no negative consequences. These data provide fairly strong evidence that there is no threshold — radiation effects are measurable as far down as you can go, given the statistical power you have at hand." Mousseau hopes their results, which are consistent with the "linear-no-threshold" model for radiation effects, will better inform the debate about exposure risks. "With the levels of contamination that we have seen as a result of nuclear power plants, especially in the past, and even as a result of Chernobyl and Fukushima and related accidents, there's an attempt in the industry to downplay the doses that the populations are getting, because maybe it's only one or two times beyond what is thought to be the natural background level," he said. "But they're assuming the natural background levels are fine." "And the truth is, if we see effects at these low levels, then we have to be thinking differently about how we develop regulations for exposures, and especially intentional exposures to populations, like the emissions from nuclear power plants, medical procedures, and even some x-ray machines at airports." Physicians for Social Responsibility notes: According to the National Academy of Sciences, there are no safe doses of radiation. Decades of research show clearly that any dose of radiation increases an individual's risk for the development of cancer. "There is no safe level of radionuclide exposure, whether from food, water or other sources. Period," said Jeff Patterson, DO, immediate past president of Physicians for Social Responsibility. "Exposure to radionuclides, such as iodine-131 and cesium-137, increases the incidence of cancer. For this reason, every effort must be taken to minimize the radionuclide content in food and water." "Consuming food containing radionuclides is particularly dangerous. If an individual ingests or inhales a radioactive particle, it continues to irradiate the body as long as it remains radioactive and stays in the body,"said Alan H. Lockwood, MD, a member of the Board of Physicians for Social Responsibility. *** Radiation can be concentrated many times in the food chain and any consumption adds to the cumulative risk of cancer and other diseases. John LaForge writes: The National Council on Radiation Protection says, "… every increment of radiation exposure produces an incremen­tal increase in the risk of cancer." The Environmental Protection Agency says, "… any exposure to radiation poses some risk, i.e. there is no level below which we can say an exposure poses no risk." The Department of Energy says about "low levels of radiation" that "… the major effect is a very slight increase in cancer risk." The Nuclear Regulatory Commission says, "any amount of radiation may pose some risk for causing cancer … any increase in dose, no matter how small, results in an incremental increase in risk." The National Academy of Sciences, in its "Biological Effects of Ionizing Radiation VII," says, "… it is unlikely that a threshold exists for the induction of cancers …." Japan Times reports: Protracted exposure to low-level radiation is associated with a significant increase in the risk of leukemia, according to a long-term study published Thursday in a U.S. research journal. The study released in the monthly Environmental Health Perspectives was based on a 20-year survey of around 110,000 workers who engaged in cleanup work related to the Chernobyl nuclear plant disaster in 1986. Scientists from the University of California, San Francisco, the U.S. National Cancer Institute and the National Research Center for Radiation Medicine in Ukraine were among those who participated in the research. Indeed, the overwhelming consensus among radiation experts is that repeated exposure to low doses of radiation can cause cancer, genetic mutations, heart disease, stroke and other serious illness (and see this.) If a government agency says anything else, it's likely for political reasons. The top U.S. government radiation experts – like Karl Morgan, John Goffman and Arthur Tamplin – and scientific luminaries such as Ernest Sternglass and Alice Stewart, concluded that low level radiation can cause serious health effects. A military briefing written by the U.S. Army for commanders in Iraq states: Hazards from low level radiation are long-term, not acute effects… Every exposure increases risk of cancer. (Military briefings for commanders often contain less propaganda than literature aimed at civilians, as the commanders have to know the basic facts to be able to assess risk to their soldiers.) The briefing states that doses are cumulative, citing the following military studies and reports: ACE Directive 80-63, ACE Policy for Defensive Measures against Low Level Radiological Hazards during Military Operations, 2 AUG 96 AR 11-9, The Army Radiation Program, 28 MAY 99 FM 4-02.283, Treatment of Nuclear and Radiological Casualties, 20 DEC 01 JP 3-11, Joint Doctrine for Operations in NBC Environments, 11 JUL 00 NATO STANAG 2473, Command Guidance on Low Level Radiation Exposure in Military Operations, 3 MAY 00 USACHPPM TG 244, The NBC Battle Book, AUG 02 Many studies have shown that repeated exposures to low levels of ionizing radiation from CT scans and x-rays can cause cancer. See this, this, this. this, this, this, this, this, this and this. Research from the University of Iowa concluded: Cumulative radon exposure is a significant risk factor for lung cancer in women. And see these studies on the health effects cumulative doses of radioactive cesium. As the European Committee on Radiation Risk notes: Cumulative impacts of chronic irradiation in low doses are … important for the comprehension, assessment and prognosis of the late effects of irradiation on human beings …. And see this. The New York Times' Matthew Wald reported in May: The Bulletin of the Atomic Scientists['] May-June issue carries seven articles and an editorial on the subject of low-dose radiation, a problem that has thus far defied scientific consensus but has assumed renewed importance since the meltdown of the Fukushima Daiichi reactors in Japan in March 2011. *** This month a guest editor, Jan Beyea [who received a PhD in nuclear physics from Columbia and has served on a number of committees at the National Research Council of the National Academies of Science] and worked on epidemiological studies at Three Mile Island, takes a hard look at the power industry. The bulletin's Web site is generally subscription-only, but this issue can be read at no charge. Dr. Beyea challenges a concept adopted by American safety regulators about small doses of radiation. The prevailing theory is that the relationship between dose and effect is linear – that is, that if a big dose is bad for you, half that dose is half that bad, and a quarter of that dose is one-quarter as bad, and a millionth of that dose is one-millionth as bad, with no level being harmless. The idea is known as the "linear no-threshold hypothesis,'' and while most scientists say there is no way to measure its validity at the lower end, applying it constitutes a conservative approach to public safety. Some radiation professionals disagree, arguing that there is no reason to protect against supposed effects that cannot be measured. But Dr. Beyea contends that small doses could actually be disproportionately worse. Radiation experts have formed a consensus that if a given dose of radiation delivered over a short period poses a given hazard, that hazard will be smaller if the dose is spread out. To use an imprecise analogy, if swallowing an entire bottle of aspirin at one sitting could kill you, consuming it over a few days might merely make you sick. In radiation studies, this is called a dose rate effectiveness factor. Generally, a spread-out dose is judged to be half as harmful as a dose given all at once. *** Dr. Beyea, however, proposes that doses spread out over time might be more dangerous than doses given all at once. [Background] He suggests two reasons: first, some effects may result from genetic damage that manifests itself only after several generations of cells have been exposed, and, second, a "bystander effect," in which a cell absorbs radiation and seems unhurt but communicates damage to a neighboring cell, which can lead to cancer. One problem in the radiation field is that little of the data on hand addresses the problem of protracted exposure. Most of the health data used to estimate the health effects of radiation exposure comes from survivors of the Hiroshima and Nagasaki bombings of 1945. That was mostly a one-time exposure. Scientists who say that this data leads to the underestimation of radiation risks cite another problem: it does not include some people who died from radiation exposure immediately after the bombings. The notion here is that the people studied in ensuing decades to learn about the dose effect may have been stronger and healthier, which could have played a role in their survival. Still, the idea that the bomb survivor data is biased, or that stretched-out doses are more dangerous than instant ones, is a minority position among radiation scientists. Dr. Beyea writes: Three recent epidemiologic studies suggest that the risk from protracted exposure is no lower, and in fact may be higher, than from single exposures. *** Conventional wisdom was upset in 2005, when an international study, which focused on a large population of exposed nuclear workers, presented results that shocked the radiation protection community—and foreshadowed a sequence of research results over the following years. *** It all started when epidemiologist Elaine Cardis and 46 colleagues surveyed some 400,000 nuclear workers from 15 countries in North America, Europe, and Asia—workers who had experienced chronic exposures, with doses measured on radiation badges (Cardis et al., 2005). *** This study revealed a higher incidence for protracted exposure than found in the atomic-bomb data, representing a dramatic contradiction to expectations based on expert opinion. *** A second major occupational study appeared a few years later, delivering another blow to the theory that protracted doses were not so bad. This 2009 report looked at 175,000 radiation workers in the United Kingdom …. After the UK update was published, scientists combined results from 12 post-2002 occupational studies, including the two mentioned above, concluding that protracted radiation was 20 percent more effective in increasing cancer rates than acute exposures (Jacob et al., 2009). The study's authors saw this result as a challenge to the cancer-risk values currently assumed for occupational radiation exposures. That is, they wrote that the radiation risk values used for workers should be increased over the atomic-bomb-derived values, not lowered by a factor of two or more. *** In 2007, one study—the first of its size—looked at low-dose radiation risk in a large, chronically exposed civilian population; among the epidemiological community, this data set is known as the "Techa River cohort." From 1949 to 1956 in the Soviet Union, while the Mayak weapons complex dumped some 76 million cubic meters of radioactive waste water into the river, approximately 30,000 of the off-site population—from some 40 villages along the river—were exposed to chronic releases of radiation; residual contamination on riverbanks still produced doses for years after 1956. *** Here was a study of citizens exposed to radiation much like that which would be experienced following a reactor accident. About 17,000 members of the cohort have been studied in an international effort (Krestinina et al., 2007), largely funded by the US Energy Department; and to many in the department, this study was meant to definitively prove that protracted exposures were low in risk. The results were unexpected. The slope of the LNT fit turned out to be higher than predicted by the atomic-bomb data, providing additional evidence that protracted exposure does not reduce risk. *** In a 2012 study on atomic-bomb survivor mortality data (Ozasa et al., 2012), low-dose analysis revealed unexpectedly strong evidence for the applicability of the supralinear theory. From 1950 to 2003, more than 80,000 people studied revealed high risks per unit dose in the low-dose range, from 0.01 to 0.1 Sv. A major 2012 study of atomic bomb data by the official joint U.S.-Japanese government study of the Hiroshima and Nagasaki survivors found that low dose radiation causes cancer and genetic damage: Dr. Peter Karamoskos notes: The most comprehensive study of nuclear workers by the IARC, involving 600,000 workers exposed to an average cumulative dose of 19mSv, showed a cancer risk consistent with that of the A-bomb survivors. Children are much more vulnerable to radiation than adults. American physician Brian Moench writes: The idea that a threshold exists or there is a safe level of radiation for human exposure began unraveling in the 1950s when research showed one pelvic x-ray in a pregnant woman could double the rate of childhood leukemia in an exposed baby. Furthermore, the risk was ten times higher if it occurred in the first three months of pregnancy than near the end. This became the stepping-stone to the understanding that the timing of exposure was even more critical than the dose. The earlier in embryonic development it occurred, the greater the risk. A new medical concept has emerged, increasingly supported by the latest research, called "fetal origins of disease," that centers on the evidence that a multitude of chronic diseases, including cancer, often have their origins in the first few weeks after conception by environmental insults disturbing normal embryonic development. It is now established medical advice that pregnant women should avoid any exposure to x-rays, medicines or chemicals when not absolutely necessary, no matter how small the dose, especially in the first three months.   "Epigenetics" is a term integral to fetal origins of disease, referring to chemical attachments to genes that turn them on or off inappropriately and have impacts functionally similar to broken genetic bonds. Epigenetic changes can be caused by unimaginably small doses – parts per trillion – be it chemicals, air pollution, cigarette smoke or radiation. Furthermore, these epigenetic changes can occur within minutes after exposure and may be passed on to subsequent generations. The Endocrine Society, 14,000 researchers and medical specialists in more than 100 countries, warned that "even infinitesimally low levels of exposure to endocrine-disrupting chemicals, indeed, any level of exposure at all, may cause endocrine or reproductive abnormalities, particularly if exposure occurs during a critical developmental window. Surprisingly, low doses may even exert more potent effects than higher doses." If hormone-mimicking chemicals at any level are not safe for a fetus, then the concept is likely to be equally true of the even more intensely toxic radioactive elements drifting over from Japan, some of which may also act as endocrine disruptors. Many epidemiologic studies show that extremely low doses of radiation increase the incidence of childhood cancers, low birth-weight babies, premature births, infant mortality, birth defects and even diminished intelligence. Just two abdominal x-rays delivered to a male can slightly increase the chance of his future children developing leukemia. By damaging proteins anywhere in a living cell, radiation can accelerate the aging process and diminish the function of any organ. Cells can repair themselves, but the rapidly growing cells in a fetus may divide before repair can occur, negating the body's defense mechanism and replicating the damage. Comforting statements about the safety of low radiation are not even accurate for adults. Small increases in risk per individual have immense consequences in the aggregate. When low risk is accepted for billions of people, there will still be millions of victims. New research on risks of x-rays illustrate the point. Radiation from CT coronary scans is considered low, but, statistically, it causes cancer in one of every 270 40-year-old women who receive the scan. Twenty year olds will have double that rate. Annually, 29,000 cancers are caused by the 70 million CT scans done in the US. Common, low-dose dental x-rays more than double the rate of thyroid cancer. Those exposed to repeated dental x-rays have an even higher risk of thyroid cancer. It's not just humans: scientists have found that animals receiving low doses of radiation from Chernobyl are sick as well. Most "Background Radiation" Didn't Exist Before Nuclear Weapons Testing and Nuclear Reactors Uninformed commenters (and some industry flacks) claim that we get a higher exposure from background radiation (when we fly, for example) or x-rays then we get from nuclear accidents. In fact, there was exactly zero background radioactive cesium or iodine before above-ground nuclear testing and nuclear accidents started. Wikipedia provides some details on the distribution of cesium-137 due to human activities: Small amounts of caesium-134 and caesium-137 were released into the environment during nearly all nuclear weapon tests and some nuclear accidents, most notably the Chernobyl disaster. *** Caesium-137 is unique in that it is totally anthropogenic. Unlike most other radioisotopes, caesium-137 is not produced from its non-radioactive isotope, but from uranium. It did not occur in nature before nuclear weapons testing began. By observing the characteristic gamma rays emitted by this isotope, it is possible to determine whether the contents of a given sealed container were made before or after the advent of atomic bomb explosions. This procedure has been used by researchers to check the authenticity of certain rare wines, most notably the purported "Jefferson bottles". As the EPA notes: Cesium-133 is the only naturally occurring isotope and is non-radioactive; all other isotopes, including cesium-137, are produced by human activity. Similarly, iodine-131 is not a naturally occurring isotope. As the Encyclopedia Britannica notes: The only naturally occurring isotope of iodine is stable iodine-127. An exceptionally useful radioactive isotope is iodine-131… (Fukushima has spewed much more radioactive cesium and iodine than Chernobyl. The amount of radioactive cesium released by Fukushima was some 20-30 times higher than initially admitted. Japanese experts say that Fukushima is currently releasing up to 93 billion becquerels of radioactive cesium into the ocean each day. And – as we will see below- the cesium levels hitting the west coast of North America will keep increasing for several years. Fukushima is spewing more and more radiation into the environment, and the amount of radioactive fuel at Fukushima dwarfs Chernobyl.) As such, the concept of "background radiation" is largely a misnomer. Most of the radiation we encounter today – especially the most dangerous types – did not even exist in nature before we built nuclear weapons and reactors. Nuclear Apologists Are Going Bananas Nuclear apologists pretend that people are exposed to more radiation from bananas than from Fukushima. But unlike low-levels of radioactive potassium found in bananas – which our bodies have adapted to over many years – cesium-137 and iodine 131 are brand new, extremely dangerous substances. The EPA explains: The human body is born with potassium-40 [the type of radiation found in bananas] in its tissues and it is the most common radionuclide in human tissues and in food. We evolved in the presence of potassium-40 and our bodies have well-developed repair mechanisms to respond to its effects. The concentration of potassium-40 in the human body is constant and not affected by concentrations in the environment. Wikipedia notes: The amount of potassium (and therefore of 40K) in the human body is fairly constant because of homeostatsis, so that any excess absorbed from food is quickly compensated by the elimination of an equal amount. It follows that the additional radiation exposure due to eating a banana lasts only for a few hours after ingestion, namely the time it takes for the normal potassium contents of the body to be restored by the kidneys. BoingBoing reports: A lot of things you might not suspect of being radioactive are, including Brazil nuts, and your own body. And this fact is sometimes used to downplay the impact of exposure to radiation via medical treatments or accidental intake. *** I contacted Geoff Meggitt—a retired health physicist, and former editor of the Journal of Radiological Protection—to find out more. Meggitt worked for the United Kingdom Atomic Energy Authority and its later commercial offshoots for 25 years. He says there's an enormous variation in the risks associated with swallowing the same amount of different radioactive materials—and even some difference between the same dose, of the same material, but in different chemical forms. It all depends on two factors: 1) The physical characteristics of the radioactivity—i.e, What's its half-life? Is the radiation emitted alpha, beta or gamma? 2) The way the the radioactivity travels around and is taken up by the body—i.e., How much is absorbed by the blood stream? What tissues does this specific isotope tend to accumulate in? The Potassium-40 in bananas is a particularly poor model isotope to use, Meggitt says, because the potassium content of our bodies seems to be under homeostatic control. When you eat a banana, your body's level of Potassium-40 doesn't increase. You just get rid of some excess Potassium-40. The net dose of a banana is zero. And that's the difference between a useful educational tool and propaganda. (And I say this as somebody who is emphatically not against nuclear energy.) Bananas aren't really going to give anyone "a more realistic assessment of actual risk", they're just going to further distort the picture. Mixing Apples (External) and Oranges (Internal) Moreover, radioactive particles which end up inside of our lungs or gastrointestinal track, as opposed to radiation which comes to us from outside of our skin are much more dangerous than general exposures to radiation. The National Research Council's Committee to Assess the Scientific Information for the Radiation Exposure Screening and Education Program explains: Radioactivity generates radiation by emitting particles. Radioactive materials outside the the body are called external emitters, and radioactive materials located within the body are called internal emitters. Internal emitters are much more dangerous than external emitters. Specifically, one is only exposed to radiation as long as he or she is near the external emitter. For example, when you get an x-ray, an external emitter is turned on for an instant, and then switched back off. But internal emitters steadily and continuously emit radiation for as long as the particle remains radioactive, or until the person dies – whichever occurs first. As such, they are much more dangerous. As the head of a Tokyo-area medical clinic – Dr. Junro Fuse, Internist and head of Kosugi Medical Clinic – said: Risk from internal exposure is 200-600 times greater than risk from external exposure. See this, this, this and this. By way of analogy, external emitters are like dodgeballs being thrown at you. If you get hit, it might hurt. But it's unlikely you'll get hit again in the same spot. Internal emitters – on the other hand – are like a black belt martial artist moving in really close and hammering you again and again and again in the exact same spot. That can do real damage. There are few natural high-dose internal emitters. Bananas, brazil nuts and some other foods contain radioactive potassium-40, but in extremely low doses. But – as explained above – our bodies have adapted to handle this type of radiation. True, some parts of the country are at higher risk of exposure to naturally-occurring radium than others. But the cesium which was scattered all over the place by above-ground nuclear tests and the Chernobyl and Fukushima accidents has a much longer half life, and can easily contaminate food and water supplies. As the New York Times notes: Over the long term, the big threat to human health is cesium-137, which has a half-life of 30 years. At that rate of disintegration, John Emsley wrote in "Nature's Building Blocks" (Oxford, 2001), "it takes over 200 years to reduce it to 1 percent of its former level." It is cesium-137 that still contaminates much of the land in Ukraine around the Chernobyl reactor. *** Cesium-137 mixes easily with water and is chemically similar to potassium. It thus mimics how potassium gets metabolized in the body and can enter through many foods, including milk. As the EPA notes in a discussion entitled " What can I do to protect myself and my family from cesium-137?": Cesium-137 that is dispersed in the environment, like that from atmospheric testing, is impossible to avoid. Radioactive iodine can also become a potent internal emitter. As the Times notes: Iodine-131 has a half-life of eight days and is quite dangerous to human health. If absorbed through contaminated food, especially milk and milk products, it will accumulate in the thyroid and cause cancer. (In addition to spewing massive amounts of radioactive iodine 131, Fukushima also pumped out huge amounts of radioactive iodine 129 – which has a half-life of 15.7 million years. Fukushima has also dumped up to 900 trillion becquerels of radioactive strontium-90 – which is a powerful internal emitter which mimics calcium and collects in our bones – into the ocean.). The bottom line is that there is some naturally-occurring background radiation, which can – at times – pose a health hazard (especially in parts of the country with high levels of radioactive radon or radium). But cesium-137 and radioactive iodine – the two main radioactive substances being spewed by the leaking Japanese nuclear plants – are not naturally-occurring substances, and can become powerful internal emitters which can cause tremendous damage to the health of people who are unfortunate enough to breathe in even a particle of the substances, or ingest them in food or water. Unlike low-levels of radioactive potassium found in bananas – which our bodies have adapted to over many years – cesium-137 and iodine 131 are brand new, extremely dangerous substances. And unlike naturally-occurring internal emitters like radon and radium – whose distribution is largely concentrated in certain areas of the country – radioactive cesium and iodine, as well as strontium and other dangerous radionuclides, are being distributed globally through weapons testing and nuclear accidents. Cumulative and Synergistic Damage As noted above, a military briefing written by the U.S. Army for commanders in Iraq points out: Hazards from low level radiation are long-term, not acute effects… Every exposure increases risk of cancer. In other words, doses are cumulative: the more times someone is exposed, the greater the potential damage. In addition, exposure to different radioactive particles may increase the damage. Specifically, the International Commission on Radiological Protection notes: It has been shown that in some cases a synergistic effect results when several organs of the body are irradiated simultaneously. ("Synergistic" means that the whole is greater than the sum of the parts.) Because different radionuclides accumulate in different parts of the body – e.g. cesium in the muscles, kidneys, heart and liver, iodine in the thyroid, and strontium in the bones – the exposure to many types of radiation may be more dangerous than exposure just to one or two types. As such, adding new radioactive compounds like cesium and iodine into the environment may cause synergistic damage to our health. II. How Much Radiation Will We Be Exposed To? There are 2 ways that Fukushima radiation has traveled from Fukushima to Hawaii, Alaska, Canada, Washington, Oregon and California: (1) by air; and (2) by water. By Air We noted 2 days after the 2011 Japanese earthquake and tsunami: Pollution from Chinese coal factories routinely hits California. For example, Mongabay noted in 2008: Previous studies have documented that dust from Asia — especially from deserts and industrial regions of China — routinely crosses the Pacific Ocean on prevailing winds to sully the air over the western U.S. And see this and this. As the Lawrence Berkeley National Laboratory wrote last December: About a third of the airborne lead particles recently collected at two sites in the San Francisco Bay Area came from Asia, a finding that underscores the far-flung impacts of air pollution and heralds a new way to learn more about its journey across vast distances.In a first-of-its-kind study, scientists from the U.S. Department of Energy's Lawrence Berkeley National Laboratory and the California Air Resources Board tracked variations in the amount of lead transported across the Pacific over time. *** It's well known that particles and other aerosols cover long distances through the Earth's atmosphere. But the details of this transport, such as that of the lead particles' 7,000-mile journey from the smokestacks of China to the west coast of North America, are largely unknown. In fact, the jet stream passes right over Japan. The jet stream was noticed in the 1920′s by a Japanese meteorologist near Mount Fuji, and the Japanese launched balloon bombs into the jetstream to attack America during WWII. If radioactivity got blown by surface winds up into the jet stream, it could spread widely. This has happened, to some extent. For example, radiation from Fukushima was directly deposited into the kelp off the Western coast of North America … especially in Southern California. Fish that eat the kelp have also gotten exposed to the radiation … as have the animals that eat those fish. Moreover, Seattle residents may have been exposed to some Fukushima radiation soon after the accident. Plutonium was also released into the air. For example, the Environmental Research Department, SRI Center for Physical Sciences and Technology in Vilnius, Lithuania reported in the Journal of Environmental Radioactivity: Analyses of (131)I, (137)Cs and (134)Cs in airborne aerosols were carried out in daily samples in Vilnius, Lithuania after the Fukushima accident during the period of March-April, 2011. *** The activity ratio of (238)Pu/(239,240)Pu in the aerosol sample was 1.2, indicating a presence of the spent fuel of different origin than that of the Chernobyl accident. ("Pu" is short for plutonium.) Fukushima is 4,988 miles from Vilnius, Lithuania. So the plutonium traveled quite a distance. Tepco – the operator of the Fukushima plants – has been pouring tons of water on the reactors every day. So this is helping to keep the aerial releases down. However, the Japanese government has embarked on a massive program of burning radioactive waste throughout Japan. This is idiotic … and is releasing some radiation into the air. In any event, unless the Fukushima fuel pools collapse – or the government increases the amount of radioactive materials which it burns – the air will not be the main route for the spread of radiation to Hawaii or the West Coast. By Water The jet stream can carry radiation through the air from Japan to the West Coast, as noted above. A similar dynamic is present in the water, as well. An ocean current called the North Pacific Gyre is bringing Japanese radiation to the West Coast of North America: The leg of the Gyre closest to Japan – the Kuroshio current – begins right next to Fukushima: While many people assume that the ocean will dilute the Fukushima radiation, a previously-secret 1955 U.S. government report concluded that the ocean may not adequately dilute radiation from nuclear accidents, and there could be "pockets" and "streams" of highly-concentrated radiation. Nuclear expert Robert Alvarez – senior policy adviser to the Energy Department's secretary and deputy assistant secretary for national security and the environment from 1993 to 1999 – wrote: According to a previously secret 1955 memo from the U.S. Atomic Energy Commission regarding concerns of the British government over contaminated tuna, "dissipation of radioactive fall-out in ocean waters is not a gradual spreading out of the activity from the region with the highest concentration to uncontaminated regions, but that in all probability the process results in scattered pockets and streams of higher radioactive materials in the Pacific. We can speculate that tuna which now show radioactivity from ingested materials [this is in 1955, not today] have been living, in or have passed through, such pockets; or have been feeding on plant and animal life which has been exposed in those areas." The New York Times reported in 2011: F. Ward Whicker, a professor emeritus at Colorado State University who developed a leading model for following radiation through the food chain …. said. "There can be hot spots far away from an accident, and places in between that are fine." The Congressional Research Service noted last year: There remains the slight potential for a relatively narrow corridor of highly contaminated water leading away from Japan … *** Transport by ocean currents is much slower, and additional radiation from this source might eventually also be detected in North Pacific waters under U.S. jurisdiction, even months after its release. Regardless of slow ocean transport, the long half-life of radioactive cesium isotopes means that radioactive contaminants could remain a valid concern for years. Physicians for Social Responsibility notes: An interesting fact for people living on the US west coast is also included in the UNSCEAR [United Nations Scientific Committee on the Effects of Atomic Radiation] report: only about 5% of the directly discharged radiation was deposited within a radius of 80 km from the Fukushima Dai-ichi nuclear power station. The rest was distributed in the Pacific Ocean. 3-D simulations have been carried out for the Pacific basin, showing that within 5–6 years, the emissions would reach the North American coastline, with uncertain consequences for food safety and health of the local population. Below, we will tell you that some radiation has already reached the West Coast … and we will show you some future projections for radiation. But it is important to keep in mind that – while Fukushima has been leaking massive amounts of water continuously ever since March 2011 – most of the projections being used in models of radiation do not include any releases after March 2011. As radioecologist Doug Dasher told Fox News: "The estimates [of radiation] vary substantially and do not, at least so far, account for the continued leakage from the Fukushima site to the marine environment," he said. As such, all of the models drastically underestimate the amount of radiation which West Coast and Hawaiian residents will be exposed to. Radiation Predictions The University of Hawaii's International Pacific Research Center created a graphic showing the projected dispersion of debris from Japan: A joint research project between the Chinese and South Korean governments shows the West Coast receiving Fukushima radiation:   Last year, scientists from the National Oceanic and Atmospheric Administration's (NOAA) Pacific Marine Environmental Laboratory and 3 scientists from the GEOMAR Research Center for Marine Geosciences showed that radiation on the West Coast of North America could end up being 10 times higher than in Japan: After 10 years the concentrations become nearly homogeneous over the whole Pacific, with higher values in the east, extending along the North American coast with a maximum (~1 × 10−4) off Baja California. *** With caution given to the various idealizations (unknown actual oceanic state during release, unknown release area, no biological effects included, see section 3.4), the following conclusions may be drawn. (i) Dilution due to swift horizontal and vertical dispersion in the vicinity of the energetic Kuroshio regime leads to a rapid decrease of radioactivity levels during the first 2 years, with a decline of near-surface peak concentrations to values around 10 Bq m−3 (based on a total input of 10 PBq). The strong lateral dispersion, related to the vigorous eddy fields in the mid-latitude western Pacific, appears significantly under-estimated in the non-eddying (0.5°) model version. (ii) The subsequent pace of dilution is strongly reduced, owing to the eastward advection of the main tracer cloud towards the much less energetic areas of the central and eastern North Pacific. (iii) The magnitude of additional peak radioactivity should drop to values comparable to the pre-Fukushima levels after 6–9 years (i.e. total peak concentrations would then have declined below twice pre-Fukushima levels). (iv) By then the tracer cloud will span almost the entire North Pacific, with peak concentrations off the North American coast an order-of-magnitude higher than in the western Pacific. *** ("Order-of-magnitude" is a scientific term which means 10 times higher. The "Western Pacific" means Japan's East Coast.) In May, a team of scientists from Spain, Australia and France concluded that the radioactive cesium would look more like this: A team of top Chinese scientists published a study earlier this year in the Science China Earth Sciences journal showing that the radioactive plume crosses the ocean in a nearly straight line toward North America, and that it appears to stay together with little dispersion: On March 30, 2011, the Japan Central News Agency reported the monitored radioactive pollutions that were 4000 times higher than the standard level. Whether or not these nuclear pollutants will be transported to the Pacific-neighboring countries through oceanic circulations becomes a world-wide concern. *** The time scale of the nuclear pollutants reaching the west coast of America is 3.2 years if it is estimated using the surface drifting buoys and 3.9 years if it is estimated using the nuclear pollutant particulate tracers. *** The half life of cesium-137 is so long that it produces more damage to human. Figure 4 gives the examples of the distribution of the impact strength of Cesium-137 at year 1.5 (panel (a)), year 3.5 (panel (b)), and year 4 (panel (c)). *** It is worth noting that due to the current near the shore cannot be well reconstructed by the global ocean reanalysis, some nuclear pollutant particulate tracers may come to rest in near shore area, which may result in additional uncertainty in the estimation of the impact strength. *** Since the major transport mechanism of nuclear pollutants for the west coast of America is the Kuroshio-extension currents, after four years, the impact strength of Cesium-137 in the west coast area of America is as high as 4%. Some Radiation Has Already Reached the West Coast Some radiation has already arrived on the West Coast by ocean. For example, CBC reported earlier this month: Scientists at the University of Alaska are concerned about radiation leaking from Japan's damaged Fukushima nuclear plant, and the lack of a monitoring plan. Some radiation has arrived in northern Alaska and along the west coast. That's raised concern over contamination of fish and wildlife. *** John Kelley, a professor emeritus at the University of Alaska Fairbanks, says he's not sure contamination will reach dangerous levels for humans but says without better data, who will know? "The data they will need is not only past data but current data, and if no one is sampling anything then we won't really know it, will we? "The general concern was, is the food supply safe? And I don't think anyone can really answer that definitively." An associate professor and marine chemist at University of Victoria's School of Earth and Ocean Sciences told CBC on November 20th (8:15): The Department of Fisheries and Oceans — the Institute of Ocean Science … program which is a time series program that monitors the chemistry and biology of the North Pacific that's headed up by Maria Robert. They're making measurements of these Fukushima-source radionuclides offshore, and they're starting to detect the presence of the plume of radioactivity. (Incidentally – because rain is one of the main ways that radiation can spread – seawater which evaporates and then rains on the coast can dump radiation inland for some distance). Seafood A former high-level U.S. government nuclear expert – and now one of the main advisors to Tepco regarding Fukushima – says that Fukushima radiation will hit Alaska fish. Lake Barrett – the former head of the US Department of Energy's Office of Civilian Nuclear Waste Management, which is responsible for implementing the United States' programs for spent nuclear fuel and high-level radioactive waste, and a high-level official with the U.S. Nuclear Regulatory Commission before that – told an MIT audience (36:00): The environmental release is the growing challenge; you're going to read more and more about it in the paper. Wait until the first cesium-137 shows up in Alaska salmon, which is only a matter of time. You're going to find it right back in the headlines. Bluefin tuna on the California shore have already tested positive for radiation from Fukushima, and there are reports of highly radioactive fish in Canada. III. How Can We Protect Ourselves from Radiation? The government isn't adequately testing radiation levels in the ocean, seafood or air. So it is vital that we contact our government representatives and demand that they thoroughly test for radiation … and publicly release the information. In addition, there are easy, inexpensive and healthy steps we can take right now to help protect ourselves against radiation. Here's how …

10 Monday PM Reads Posted: 02 Dec 2013 01:30 PM PST My Afternoon plane reading: • Bull Market Shows No Sign of Death With Yellen Support (Bloomberg) but see The Stock Market Is At An All-Time High — Here's Why So Many Americans Don't Care (Business Insider) • Idea Velocity: What I learned from SAC (Dasan 大山) • Colleges are teaching economics backwards (WaPo) • Does QE cause deflation? (Not Quite Noahpinion) • What a Higher Minimum Wage Does for Workers and the Economy (Businessweek) see also America's Role as Consumer of Last Resort Goes Missing (Bloomberg) • Surowiecki: Is Health Care Spending Finally Falling? (New Yorker) • The Secrets Of A Memorable Infographic (Fast Company) • Amazon Promises Package Delivery By Drone: Is It for Real? (IEEE Spectrum) • Matt Hoyle's Comic Genius: Portraits of Funny People (Neatorama) • Star Trek Transporter Room Bath Mat & Shower Curtain Set (Think Geek) What are you reading?

Top Reddit Posts Posted: 02 Dec 2013 11:30 AM PST Click for interactive graphic Source: UK Data Explorer

Debunking the Bear Case Posted: 02 Dec 2013 09:00 AM PST These bullet points were from a (much longer) Merrill Lynch research piece last week. “With most of our market indicators flashing green, we address the bear cases below to either debunk them or provide evidence that the risks are priced into stocks.” 1. "The 5-year bull market is long in the tooth" 2. "Everybody's bullish – it's time to sell" 3. "Valuations are too high" 4. "Margins are peaked and poised to collapse" 5. "Higher rates are bad for equities" 6. "The Fed is about to take the punch bowl away" 7. "Europe continues to ail" 8. "China is a disaster waiting to happen" 9. "Dysfunction in Washington DC is spiraling out of control" 10. "Geopolitical tensions are running high" They then proceed to make a good effort taking each of these items apart. I cannot post the PDF as its copyrighted work product — but you should dig up a copy . . .     Source: 2014: Debunking the bear case Savita Subramanian BAML Equity and Quant Strategy 26 November 2013

10 Monday AM Reads Posted: 02 Dec 2013 07:00 AM PST Welcome back after the long holiday weekend, Some reading material to start off your post-turkey week: • Investors excited about the market at the wrong time (MarketWatch) but see Why you should always buy on Black Friday (MarketWatch) • Bagehot: An Economists' Oscar Wilde (Wilson Quarterly) • WWJD: What Will Janet Do? (WSJ)   Continues here

The Innumeracy of the Media Has Not Been Greatly Exaggerated Posted: 02 Dec 2013 06:30 AM PST One would hope that after a decade of people lamenting the poor reporting of Thanksgiving weekend retail data, the news media might learn to do better. Yet we see few if any signs that reporters understand the misleading press releases put out by the retail industry and its flacks. The innumeracy of the media has not been greatly exaggerated. The Wall Street Journal, the New York Times and others reported industry estimates of sales as if they were grounded in fact. As we discussed last week (“Ignore the Black Friday Hype“), these shopper surveys and measures of foot traffic have in the past had no predictive value relative to retail sales. Their track records are fairly awful. The National Retail Federation has been especially terrible in its forecasts. A coin flip– 50/50 chance of getting it right — has much greater accuracy than these surveys.   Continues here

Media Hall of Shame: Black Friday Reporting Posted: 02 Dec 2013 03:51 AM PST I am writing up my BBRG coverage of the innumerate business reporting of Black Friday and the holiday shopping weekend. The press as per usual got it wrong again this year. Here is the press release from the  NRF, pushing their usual survey silliness as if it were actual retail sales data: “More than 141 million unique shoppers have already or will have shopped by the end of the big Thanksgiving weekend, up from 139 million over the same time frame last year. For those who shopped multiple times over the weekend, the survey found more than 248 million** waited in line, took advantage of big discounts offered throughout the mall and shopped on retailers websites, up from 247 million shoppers last year. According to a National Retail Federation survey conducted by Prosper Insights & Analytics over the weekend, traffic on Thanksgiving Day itself grew 27 percent as nearly 45 million shoppers, or 31.8 percent of holiday shoppers, took advantage of special "turkey day" savings offers, up from 35 million in 2012. Black Friday was the biggest day: more than 92 million people shopped (65.2%) for apparel, electronics and more, up from nearly 89 million last year. Low prices helped keep Americans' budgets in check this weekend: on average, shoppers spent $407.02 from Thursday through Sunday (planned), down from $423.55 last year. Total spending is estimated to reach $57.4 billion.” Here is the NYT, dutifully acting as stenographer for the trade group: “More than 141 million people shopped online or in stores between Thursday and Sunday, according to a survey released Sunday afternoon by the retail federation, an increase of about 1 percent over last year. And the average amount each consumer spent, or planned to spend by the end of Sunday, went down, dropping to $407.02 from $423.55. Total spending for the weekend this year was expected to be $57.4 billion, a decrease of nearly 3 percent from last year's $59.1 billion.” The WSJ was no better, literally wrong from the very first sentence: Retail spending over Thanksgiving weekend dropped for the first time in at least seven years, the industry’s main trade group said, as the blitz of deals and earlier opening hours apparently failed to pry more dollars out of the hands of budget-conscious shoppers. Even Bloomberg got this wrong: “U.S. retailers eked out a 2.3 percent sales gain on Thanksgiving and Black Friday, in line with a prediction for the weakest holiday results since 2009. Sales at brick-and-mortar stores on Thanksgiving and Black Friday rose to $12.3 billion, according to a report yesterday from ShopperTrak. The Chicago-based researcher reiterated its prediction that sales for the entire holiday season will gain 2.4 percent, the smallest increase since the last recession.” There are lots of others but I expect more from these 3.  My morning commentary at Bloomberg View goes into greater detail. It should be posted later this morning.   Recently: Ignore the Black Friday Hype Bloomberg View Nov 25, 2013 8:05 AM ET Retail theater: Beware of bad Shopmas data! Washington Post, November 29, 2013   Previously: Did Black Friday save the season? Beware the retail hype. (Washington Post, Dec. 4, 2011) Retail Sales Disappoint on False Black Friday Reports (Dec. 13th, 2011) No, Black Friday Sales Were Not Up 16% (not even 6%) (Nov. 28th, 2011) Entering the Holiday Shopping Season (Beware Surveys!) (Oct. 28th, 2009) Spinning Black Friday Retail Sales (Dec. 1, 2008) Repeat After Me: Spending Surveys Are Meaningless (Oct. 2007) More Bad Data from the NRF? (Nov. 2006) Holiday Sales Numbers Don't Add Up (Dec. 1, 2005)

60 Minutes: The Future of Amazon Posted: 02 Dec 2013 03:15 AM PST Amazon is the world’s largest online retailer, serving 225M customers. What’s next for the company that prides itself on disrupting tradition? Amazon’s Jeff Bezos looks to the future

Sarkar: Monthly report – November Posted: 02 Dec 2013 02:45 AM PST The US October non farm payroll (NFP) report came in much stronger than expected at  +204k jobs, rather than the +120k expected, with August and September revised higher. Furthermore, subsequent weekly unemployment data confirms that the US employment situation is improving. US Q3 GDP was better than expected, at +2.8% on an annualised basis, higher than the +2.0% expected and may well be revised higher. However, Q4 GDP is likely to be lower, reflecting a reduction in inventories, combined with the impact of the partial government shutdown. The data has lead the market to focus on the timing of the FED tapering programme. This weeks November NFP data will be an important data point. Mr Bernanke has suggested that the FED will remain accommodative, even after it starts tapering. Indeed, the FED's unemployment threshold (before it considers raising interest rates) could be reduced from the current 6.5%. Low inflation enables the FED to justify such a move. Mrs Yellen is set to become the next FED Chairperson. During the course of her testimony as part of the appointment process, she confirmed her dovish bias. She stressed that "labour markets and the economy (are) performing short of their potential", adding that unemployment "was still too high". Furthermore, she added that  "It's important not to remove support when the recovery is fragile". In the Q&A's she stated that the true level of unemployment in the US was likely over 10%, as opposed to the 7.3% rate reported in the Octobers NFP report. She added that inflation was below the FED's threshold of 2.0% and implied that she did not see inflation as a threat at present – core PCE was +1.2% Y/Y in September. In addition, she stated that she did not see any bubbles forming. Essentially, she stuck to the Bernanke script. Her general tone was dovish, especially in the Q&A's, which suggests that she will be in no hurry to start the tapering process. As long as she can persuade her colleagues, I continue to believe that tapering will not start before March of next year. It is clear that the FED is agonising over its asset purchase programme and would like to start tapering, "in coming months". However, they will want to avoid the experience earlier this year when rates rose sharply following the mere suggestion that the FED could start its tapering programme. As a result, the FED has stressed that tapering will still mean that the FED will be buying treasuries and mortgage backed securities, albeit at a reduced rate. In addition, Mr Bernanke and Ms Yellen have emphasised that the FED accommodative policy would be maintained for an extended period. Whilst there was some mixed US industrial/manufacturing data, October retail sales came in higher than expected. The disinflationary trend in developed markets has spread to the US, with CPI declining by -0.1% in October, as compared with +0.2% in September. However, the lower inflationary trends allow the FED to maintain a more dovish position. Analysts have increased their 2014 forecasts and are now predicting GDP of around +2.75%. Analysts were shocked that the ECB President Draghi cut the main refi rate by 25 bps to 0.25% last month. However, with EZ inflation at just 0.7% pa in October (0.9% pa in November), the ECB had to act. Draghi referred to "a prolonged period of low inflation". Some countries such as Greece are facing outright deflation. I expect the ECB will cut rates by a further 10/15 bps next year. However, such reductions in interest rates are not going to make a difference. Another LTRO (possibly for 5 rather than 3 years) is likely. The idea of negative deposit rates has been raised, though I believe that such a policy is unlikely. The problem for the ECB is that QE, as employed by the FED, BoE, BoJ etc, is far more difficult for it to introduce as a policy, though may be forced into it. With money supply and bank lending declining (which will get worse as EZ banks deleverage ahead of the stress tests), the EZ faces continued problems. The ECB is considering measures to increase credit, in particular to SME's. The EuroZone's Q3 GDP came in at just +0.1%, lower than the +0.3% in Q2. French Q3 GDP declined by -0.1%, whilst Italy remains in recession. German Q3 GDP came in at +0.3%, in line with expectations, though below the +0.7% in Q2. The EU has warned a number of countries may well fail the debt and deficit rules, including France and Spain. However, politically further austerity is going to be a very hard sell. The market has largely ignored the poor French data, though I continue to be highly concerned about the country. President Hollande does not seem to have taken the action necessary and I have no confidence that he will. S&P downgraded France by 1 notch to AA and recent PMI data suggests that Q4 GDP could be negative. If so, France will technically be in a recession. In Italy, political risk is rising as Mr Berlusconi was ejected from the Senate. Germany, Luxembourg and Finland are the only countries in the EZ with a AAA rating, following Hollands downgrade by S&P. On a more positive note, Ireland and Spain announced that they would exit the bailout programme and Spain was upgraded by Fitch and S&P. EZ unemployment declined to 12.1%, from 12.2% in September. Recent German data suggests that the economy has bounced back from a slight downturn in summer, with business, consumer and investor confidence rising. However retail sales were lower and unemployment edged up for the 4th consecutive month. Mrs Merkel's CDU has reached a deal with the SPD to form a grand coalition, though the deal needs to be ratified by the SPD membership – the results are expected in mid December. The EZ  is bumbling along with very low growth and the the risks are to the downside. Negotiations over the establishment of the Single Resolution Mechanism in the EU to deal with undercapitalised banks failed to reach a clear cut conclusion. The Germans rejected the idea of using the ESM (in effect they have a veto), as proposed by the a number of countries, including France and Spain. They suggest that rules relating to bail ins by creditors be brought forward. In addition, the Germans do not want the European Commision to be the arbiter of the rules governing the Single Resolution Mechanism – they suggest it should be Council of the European Union, which is made up of representatives of EU countries. The ECB, which takes over EZ financial supervision has stressed that there is a need for a "strong and independent" European Resolution Mechanism, which clearly must be right. However, will that be the case?. Some 5 years into the financial crisis, the EZ has failed to resolve the problems of a number of its banks. This issue will become much more important in the coming year, especially as the ECB is to conclude the assessment/stress tests of the largest banks by next November. It is expected  that some banks will fail the stress tests. The big question remains – who will provide the backstop in case the private sector does not come up with the necessary capital to recapitalise those banks which fail the stress tests. You could argue that the ECB's actions will force the politicians to act, though the relevant banks will have to accept a pretty tough deal. As a result, EZ banks are reducing their balance sheets to try and meet the more stringent ECB capital rules, which will hurt their economies. The UK economy continues to improve. Q3 GDP rose by +0.8% Q/Q, better than the +0.7% in Q2 and +0.4% in Q1. The main growth drivers were investment and housing, though exports declined. Unemployment has fallen to 7.6%  in October, the lowest since May 2009. October services PMI rose materially, which suggests that the UK economy will continue to strengthen. The rise in house prices, in particular in London and the South East has raised concerns, with the BoE announcing curbs on mortgage support programmes. In addition, the BoE has warned that it may introduce further measures to limit home prices next year. The Governor has stressed that the BoE will remain accommodative, even if unemployment declines to its target of 7.0%. The improving economy has increased tax receipts, which will reduce the UK's budget deficit. In general, the UK economy is strengthening and 2014 GDP forecasts have been raised to around +2.75%. Japanese Q3 GDP declined to +1.9% on an annualised basis, down from +3.8% in Q2, mainly due to a record trade deficit, together with lower capital expenditure. Consumption was also relatively weak – Japanese companies have not increased salaries and wages. Retail sales, seasonally adjusted, declined in October. Inflation is rising, with the BoJ's favoured rate rising to +0.9% Y/Y in October.  If inflation rises to 2.0% (the BoJ's target), how can 10 year Japanese bonds yield just 0.60%, as they do at present. Yes, the majority of Japanese bonds are owned by the Japanese, but will they continue to buy bonds which yield well below prevailing inflation – I doubt it. Recent data suggests that the Japanese are increasing their purchases of foreign bonds.That suggests that the BoJ will be the only major buyer of government bonds. It is clear that the BoJ is pressing for a weaker Yen, combined with much higher inflation, to reduce the level of accumulated debt. However, the Japanese government has not pursued the structural changes that are necessary to revitalise its economy. As we all know, Japan’s fiscal position is dire. The only conclusion that I can draw is that the BoJ is set to monetise Japanese debt. However, will other countries sit back and watch the Yen depreciate materially. I very much doubt it. The Nikkei is responding positively to the weaker Yen and is at a 6 year high. I have been a sceptic of "Abenomics" and remain so. The Chinese official news agency released details of the policy objectives agreed by the Party at their recent meeting. Generally, they included a number of reforms that are welcome and, indeed, necessary to rebalance the Chinese economy by encouraging domestic consumption, whilst relying less on fixed asset expenditure. The 1 child policy is to be loosed somewhat. There was some relaxation of the Hukou system which limits internal migration. SOE's are to give up more of their profits to build social infrastructure. There was also a reference to property taxes and the ability of the rural community to have more property rights. In addition, the PBoC is to deepen the reforms and open up the financial sector. Currency convertibility was mentioned. The key message was that China would allow markets a more "decisive" role in allocating resources. The main issue, however,  is whether these broad principles will be translated into actual policy, accompanied by the necessary legislation. A number of the proposals will not benefit a number of powerful vested interests and I would expect a tendency to water down such reforms. In addition, the actual policies/legislation will take quite a long time to finalise – it looks as if a 2020 deadline has been set. The Bank of China has allowed interest rates to rise, which will impact the financial sector and businesses. Bad debts are certain to rise. The authorities have not yet announced the "true" level of provincial debt, assuming they can actually quantify the number. However, reported debt to GDP is likely to be grossly understated. Recent data suggests that capital is being withdrawn from China. Of concern is the announcement by the Chinese authorities of an air defence zone, which covers certain islands whose ownership is claimed by Japan. The US, Japan and South Korea have ignored these measures. Mr Abe, the Japanese PM, has tended to play the nationalistic card and is highly unlikely to back down from its territorial claims. Whilst direct confrontation is highly unlikely, the threat of an accident between the Chinese and other countries is real. China has a number of territorial disputes with countries in the region. Overview US bond funds continue to witness outflows, with money being redirected into equities, rather than into money markets and the housing sector, as was the case previously. In addition, margin debt has risen materially. Generally, these kind of indicators are good contrarian indicators. However, equities traditionally perform better at this time of the year and market momentum is positive, which suggests that markets have further to rise. US markets are trading at record highs, as is the DAX in Europe and the Nikkei is at a 6 year high. Commodity prices, with the exception of Brent, declined in the month, though in the US, oil prices continue to fall as production increases. I remain cautious, though it is difficult to short the markets given the current momentum. Markets, however, are no longer cheap and 2014 global growth forecasts (mainly due to emerging markets) continue to be reduced. I believe it sensible to buy protection, especially in respect of Q1 and later next year. In addition, I believe that the risk profile of equity portfolios, should be reduced. One of my major concerns is that the markets are overly complacent over the EZ – France for example.  In addition, I simply do not believe in Abenomics, especially in the medium to longer term. The Japanese policy is limited to devaluing the Yen and increasing inflation – much needed structural reforms have not been introduced. In general, I believe that stock picking will become much more important into 2014. I would avoid emerging markets, especially those countries with current account deficits. These countries will be the first to be impacted as the FED starts tapering, especially as a number have not introduced the economic and structural reforms necessary. Their currencies continue to look vulnerable. The markets have delivered outstanding returns this year which, even if you are bullish, are highly unlikely to be replicated next year. My preferred theme continues to be to increase US$ exposure – it certainly has worked against the Yen and the A$ and I expect both these currencies to weaken further. The Euro has weakened, but has bounced back from its lows, though not quite to its recent highs. The much better UK data has supported Sterling, though Sterling is susceptible to problems in the EZ. A number of forex analysts talk about the Euro rising to US$1.40. I remain amazed at the Euro's resilience, given the real problems of a number of the major countries in the EZ and I continue to believe that the Euro will weaken materially in 2014. Kiron Sarkar 2nd December 2013

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