Nine things I just don't understand

Every so often, Macro Man is accused (often by friends and family) of being a know-it-all. As regular readers will have no doubt deduced, he does tend to have strongly-held opinions, and is often less than subtle in his manner of expressing them. But one thing that he takes special care to avoid is overconfidence, and a willingness to admit that he does not know something has saved him from loss and embarrassment on a number of occasions.

As Macro Man scans the world around him, he sees plenty of cause for confusion and head-scratching. Among the things that he does not understand are the following:

1) What, if anything, is the C&I loan data saying? Amidst the "worst crisis in 25 years", commercial and industrial loan growth has soared. Some of this no doubt represents a substitution effect (i.e, bank borrowing rather than CP or bond issuance), but the very fact that banks have been willing to lend suggests the fears of a financial system implosion were overstated. Indeed, current y/y C&I loan growth is the highest in-you guessed it-25 years.

Given the braodly cyclical nature of loan growth, that would appear to suggest that the US economy is as far from recession as you could get. Yet the indicator appears to be a lagging one; in the last economic downturn, for example, loan growth didn't turn negative until July 2001. So is the C&I telling us about the cycle, liquidity, or just the substitution of bank borrowing for issuance?
2) In the aftermath of the first bank run since the 19th century, how can the UK Government be so popular? Regardless of where one sits on the political spectrum, it is hard to escape the notion that the Northern Rock fiasco could have been handled better. Normally, scenes of lengthy queues outside of banks would spell disaster for the current government. Yet Labour, led by the heretofore intensely uncharismatic Gordon Brown has, if anything, seen its approvals ratings rise, to the degree that Gordo is contemplating an early election. How has this happened?

3) How has the Ireland rugby team become so bad, so quickly?

4) Why, on the day that Goldman Sachs reported blow-out earnings ($6.13 versus $4.35 expected) and Bear Stearns reported awful earnings ($1.16 versus $1.71 expected) did GS stock fall $1.97 while Bear stock only declined by 18 cents?

5) What are GCC countries waiting for? Kuwait has revalued the dinar by another negligble amount this morning, yet other Gulf countries have remained steadfast in their dollar pegs. What are they waiting for before they float/revalue? The current policy regime is pretty clearly highly suboptimal, and as things now stand the macroeconomic impact is only going to get worse. With oil at 80 bucks, it's not exactly like the Gulf countries are going to run out of cash any time soon, so why wait? Is it because they wish to avoid speculation on their domestic currencies?

If so, the permit Macro Man a derisory snort, given that Middle Eastern institutions are among the more predatory speculators in the G4 currency markets.

6) Why are short-dated inflation breakevens in the US so low? In case you hadn't noticed, commodity prices are en fuego recently. And these tend to be the primary driver of changes in headline CPI. The weak dollar has attracted a bit of attention as well., and we know that China is no longer exporting deflation. So why are short-term breakevens (proxied below by the 1 year inflation swap) near their lows of the last six months?

7) Why, when Macro Man's normal morning train has been cancelled, do the railway workers not announce this until the following train (which offers an indirect service into London) has come and gone, thereby stranding passengers for half an hour? Is it really that difficult to tell us in time to catch the next train?

8) How weak for how long does European data need to be before we start to see "re-coupling" research emerge? H1 growth rates in the US and Euroland were virtually identical. Business sentiment in both regions has seen a similar decline in H2. Japanese growth remains unimpressive, to say the least. US leading indicators are stronger than in either Europe or Japan. At what point do markets begin to focus on G3 cyclical convergence, and what are the implications?

9) What sort of blog post prompts a strong reader response? Macro Man has been writing in this space for a little more than a year now, which he finds difficult to believe. His primary objective for the blog was and remains a forum for organizing his thoughts, trying out new strategies, and improving his performance in his "real job." But he's been pleased to see his readership grow, and come to value the interactions in the comments section with fellow bloggers and market participants.

One thing that he cannot figure out, however, is what sort of post prompts readers into commenting. Sometimes, he'll dash off a random thought and find that it generates quite a bit of discussion. Other times, he'll write something that he finds particularly thought-provoking or amusing, only to find little reaction.

Perhaps it shouldn't come as a total surprise; after all, many readers are fellow participants in financial markets, and those aren't always easy to anticipate either...