A Holiday Limerick

As Macro Man sat by the sea,
The destruction was quite plain to see
The waves caused consternation,
With a big dislocation,
And the worst of the lot was Wave C!



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Linda P.
admin
August 16, 2007 at 2:38 PM ×

Tough conditions for a holiday Macro!

You seem to be embracing it though..

:)

Cheers!

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T
admin
August 16, 2007 at 3:08 PM ×

What a time to go on holiday.
You have been missed. Welcome back!

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Anonymous
admin
August 16, 2007 at 4:23 PM ×

So MM... is this becoming more similar to '98? And if equities tumble another 10%? Was Cramer right after all?

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Macro Man
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August 16, 2007 at 6:05 PM ×

Today is indeed starting to resemble 1998 in terms of market implication- i.e. the utter implosion of carry trades and other multi-standard deviation moves in FX (i.e., NZD/JPY down 10% today.)

Whether systemic risk is what it was in 1998, I am not sure. The seizure of the cash market is of clear concern, and the Fed and other CBs have tried to step in their. Further lock-up could indeed prompt rate cuts. But it was only last week that the equity market chose an absurdly bullish interpretation to a Fed statement that offered little, to my reading, by way of interest rate succor.

So for me, the jury's still out. While I have no real wish to kick anyone when they are down, I do think think that some of the 'going out of business' signs that will be appearing in hedge fund shop windows will probably be deserved.

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OldVet
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August 16, 2007 at 8:15 PM ×

One path for currency moves appears to be a sine wave, in which dollar rises now (except for SFranc and Yen), to be followed later by a fall when Fed cuts rates. Safe havens are only safe as long as they are better than the alternatives. On equity side, maybe punters are starting to realize the huge debt loads dumped on the books of public firms acquired by private equity funds. Future cash flows to investors won't be so generous expecially if credit risk reprices as it appears is happening.

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