Monday, February 25, 2008

Has anything changed (except the weather?)

Macro Man is back in the saddle after a week on the slopes, and to be honest it's difficult to see much that's changed.

Equities going nowhere fast? Check.

A monoline rescue plan in the works? Check.

Inflation uncomfortably high in the US and elsewhere? Check.

Banks still taking underperforming, unsaleable assets onto their balance sheets? Check.

OK, a few things have changed. The dollar's a bit weaker on a broad basis, but surely that's what you'd expect given the negative interest rates at the short end? Similarly, the continued weakness at the back end of the yield curve couldn't have been much of a surprise given last week's horrible CPI number. And frankly, $100 oil and gold within spitting distance of a grand don't exactly suggest that that dynamic is going to roll over any time soon, are they?

Macro Man often finds that time away from the market provides an opportunity to reflect on longer term themes. This year, he found himself musing on the impact of climate change more often than not.

Perhaps it was the cost of the flight, boosted by taxes and rising fuel costs.

Perhaps it was the fact that he was skiing with a friend who runs a large energy fund and remains rampantly bullish on oil.

Perhaps it was the fact that as a winter holiday comes to a close, one's thoughts naturally drift towards making plans for the summer.

Regardless, as Macro Man practiced his telemark technique high up in the Alps (pictured, left), he found himself thinking about global warming a lot.

OK, the snow wasn't THAT bad. But it's been more than two weeks since the last snowfall, so things did get a bit slushy over the last couple of days.

Hmmm....perhaps it's just a case of UBS's future overlords wanting to make themselves at home?


t said...

Pentagon tells Bush: climate change will destroy us

It may turn colder in N Europe if the Gulf Stream changes course.

Anonymous said...

Great, maybe we will once again experience the phenomenon known as "winter".

Anonymous said...

Mr Macro

Will we see the return of the beta carry trade in your portfolio any time soon? Do you have any comments to share on the shifts in composition of the top three/bottom three currencies?


pupkinus said...

Welcome back! I've been missing your insightful posts!

CV said...

Good to have you back MM ... interesting stuff on Hungary today* eh? It will be interesting to see how it plays out as we move along.


*I.e. they scrapped the trading band of the Forint to quell inflation.

Anonymous said...

"Pentagon tells Bush: climate change will destroy us"

And in the four years since then, nothing has changed - except that the climate change Gestapo has become louder.

2and20 said...

Claus, thanks for mentioning that, I hadn't seen the news on the Forint and just used the rally to short it against the dollar (all posted on my modest blog, which actually mentions your excellent postings on Eastern Europe). USD near multi-year lows against HUF, hopefully I can pick a bottom in this and the collapse of Eastern European currencies begins...

MM, thinking about long-term themes is certainly interesting...I keep thinking about the internet...if someone had told you in 1994 that within a decade you could have access to any piece of information you ever wanted within a few seconds, would you have called that someone crazy? Too many people only think of the small changes that can happen, be it in the markets or otherwise.

What if the Gulf Stream really does change course? A freezing Europe...don't forget, the distance from the UK to the arctic circle is only about the same as New York to Florida!

What if genetics allows us to extend average life expectancy to 150? THAT will impact asset values! It's not ridiculous...even WITHOUT meddling with genes, scientists have shown that mice on a restricted-calorie diet can live TWICE as long as the average. gene therapy could do incredible things.

A global flu pandemic?
A global depression?
The US/global banking system collapsing?
A complete run on the dollar as faith in fiat disappears?
World War 3 as Iran nukes Israel, and the US/Russia/China get involved?
Global food stocks crashing as the bee population collapses?

lots of crazy stuff out there to potentially happen! I'll take my tinfoil hat off now...

CV said...

Oh 2and20 ...

I did not know you had a blog. I will be updating my blogroll and RSS feeds accordingly.

On the HUF, we will see I guess. It was pretty inevitable this move I think but now the real test comes and it may very well get ugly since Hungary is in very tight spot at the moment.