Thursday, December 06, 2007
Ah, the festive season! Christmas trees are springing up, nativity plays are being performed, carols are pouring out of the radio, and all across the City copious amount of rich food and expensive claret are being consumed at lunch and dinner time. It's enough to bring a tear to the eye, especially amongst those whose bonus checks will be signed by Ebenezer Scrooge this year.
Macro Man has yet to start on his Christmas shopping (any suggstions for cool presents for Mrs. Macro gratefully received), as he has been busy writing his annual letter to Santa, complete with Christmas wish list. This year's list included the following:
1) Comeuppance for currency piss-takers. Or, put another way, a messy collapse to the Bretton Woods II arrangement. Now that the inflationary consequences of wildly inappropriate currency policy are being felt from Beijing to Bahrain, Macro Man would like to see these effects intensify until China, the GCC, and others are forced to abandon or significantly alter their pegs. Remember, chaps, those who refuse to get off a sinking ship have no right to complain if their feet get wet.
2) The correct reporting of inflation. Is it really too much to ask that the cost of living be accurately reflected in government statistics (and by extension, reflected in the price of inflation linked bonds)?
3) Policymakers admitting when they f$*& up. It's hard to know whose stock has fallen further this year: Northern Rock's or Mervyn King's? The unedifiying spectacle of the UK authorities' passing the blame for the Northern Rock debacle was surpassed only by Swervin' Mervyn's subsequent claim that the Bank of England had performed better during the crisis period than either the Fed or the ECB. Uh, Merv? No.
In any event, the BOE has an opportunity to atone for recent gaffes by doing the sensible thing and trimming rates today. Will Merv defy common sense just to make a point to the man who will get rid of him next year?
4) World peace, a car that runs on water, and a cure for cancer. See, Macro Man is not totally selfish.
5) A BMW M3. Or, more to the point, clearance from the control tower to purchase one. Assuming that the car that runs on water is not immediately forthcoming, the elder Macro Boy has now goaded Macro Man into trading in his trusty old Golf for something a bit "cooler."
6) A middle/back office that understands its place in the organizational hierarchy. Namely, that it is a service provider, not the centre of the investment universe. (Small organizational grumble here.)
7) The return of alpha. Financial market de-coupling is one of Macro Man's themes for 2008, when value will out and investors will be forced to choose quality and sell rubbish, rather than just buy everything and sell everything. While this may spell doom for Macro Man's beta strategies, he hopefully has enough market acumen to more than benefit via the alpha portfolio.
8) Getting on the distribution list for "the memo." In the event of Christmas wish number 7 not being granted, Macro Man would like to start receiving "the memo." You know, the memo that the market seems to receive early in the day that says "we're going to buy risky stuff today" or "we're going to sell risky stuff today", which leads to a host of apparently unrelated items all doing the same thing at the same time. If subscriptions to "the memo" are unavailable, a phone call from The Economist's art department the night before they put the dollar on the cover would suffice.
9) The immediate writedown of all subprime and other structured credit turds to fair value. We know it's coming, we know it's in the pipeline. It can either be done slowly, in drip-feed fashion, with rumours and speculation rampant.....or it can be done in one fell swoop. It's a situation very similar to the GCC currency peg, insofar as ripping off the band-aid would ultimately be better than trying to peel it off slowly.
10) The ability to remain objective, keep a clear head, take necessary losses, and cach up on sleep at the weekends. 'Nuff said!