Greatest Hits

Friday's late session swoon was surprising, to say the least. While Macro Man has been confident that the worst for risky assets was not over, he reckoned that the bounce had a bit further to go. Of course, the really ugly interpretation is that the entire sell-off from the highs is still part of Wave A, in which case the ultimate low is that much further away (both in terms of time and of price.) Regardless, a re-think of the original gameplan is in order.

Unfortunately, this period of market volatility has coincided with Macro Man's annual summer holiday. And while he will be managing his real-world portfolio from afar, he will not be in a position to update this space while away. Readers should feel free to use the comments section of this post to exchange views; there is a small chance that Macro Man may occasionally comment himself. For what it's worth, his view is that the hysterics and histrionics of Cramer and the hyperbole of Bear Stearns is unwarranted.

Is there some distress amongst certain mortgage borrowers? Yes.

Is there distress amongst people who thought that buying high-yielding "AAA" paper was free money, and so stuffed their portfolios with turds? Yes.

Is there distress amongst people like Cramer who evidently think that the Fed should target positive equity returns instead of inflation and employment? Yes.

Will there be more losses? Yes.

Will there be more hedge funds closing? Yes.

Will the market go down more? Almost certainly yes.

Is this the end of the world? No.

This is a painful repricing of credit risk, and a timely reminder to people that if anything seems too good to be true, then it probably is.

To give readers, particularly those who have come across this space relatively recently, something to peruse over the next couple of weeks, Macro Man hereby presents his list of 'Greatest Hits'- some of his favourite posts of the last eleven months:

* What is the bond market smoking, and where can I get some? Macro Man's very first post

* Is the yield curve forecasting a recession? On the (in)utility of the yield curve as an economic forecasting tool

* Harry Potter and the FX Reserve Managers The original of the term 'Voldemort' for China's FX reserve manager

* Beta release The study behind the equity beta-plus strategy

* Carry Me Home And the study behind the FX carry beta plus portfolio

* Nouriel Roubini is a Big Fat Idiot The post that instigated Macro Man's correspondence with Brad Setser, Macro Man debunks the myth that the yen carry trade is similar to 1998

* Eight points, Yen again, and Return of Serve Follow-ups to the above

* When the Facts Change Macro Man revises his view

* Cornflakes Without the Milk On the importance of accounting for dividends

* A remedial lesson in statistics On the nature of distributions- particularly apposite in the current fat-tailed credit environment

* FX Carry: A SAFE Haven Calculating Voldemort's investment performance

* A Ratings Agency Toolkit A recent attempt at humour

Good luck.

Macro Man will return on August 20