Tuesday, September 16, 2008
So Team 1250 rolled snake eyes and did nothing with interest rates. From an economic perspective it's not such a bad decision- as noted this morning, previous cuts haven't exactly been a panacea for this market.
In any event, AIG is now the main event, and even as Macro Man writes this post, the Fed is on the tape saying that they may lend money to AIG. Cue the obligatory 20 point bounce in the SPX from the levels prevailing when the chart below was printed.
Far be it from Macro Man to point out that the emperor has no clothes...but didn't the Fed also lend money to Lehman Brothers via the various TAF/PDCF/TSLF programs? How did that work out for everybody?
In any event, given that AIG management has refused capital that would require their own departure (known forever more as "Fulding 'em"), any infusion of public money should require immediate hari-kiri for the AIG management team.
While the market is starting to feel a bit squeezy, it does feel like it needs a final cathartic flush ; price action similar to yesterday's would probably do the trick. Macro Man reduced some of his short deltas earlier today , and at this point isn't sure whether his next equity trade will be a buy or a sale.
In this market, best to stay nimble so that you don't crap out.