Tuesday, November 18, 2008


Markets remain edgy today, with SPX futures current trading down 2% from Monday's limp close. Last week's 11% intraday rally seems like a long time ago in a galaxy far, far away.

At this point, however, Macro Man is refraining from embracing the downdraft with both arms. There have been too many intraday reversals to make him comfortable; while that may be a precondition for the next leg lower, the burden of proof is on the index to close lower. Sometimes looking at a simple line chart can provide insight; as the graph below demonstrates, the SPX has yet to close meaningfully below 850 despite plenty of intraday action below that level. A close anywhere near current futures prices (834) would therefore be significant.
There is a similar pattern in currencies, where EUR/USD, for example, has been confined between 1.25 and 1.30 on a New York closing basis, despite plenty of price action on either side of that range. For choice, Macro Man favours a break lower, as his sense is that there remain plenty of embedded overweight, offside euro positions out there.
Perhaps we might need to see vol sellers come out of the woodwork before a break can happen, however. While currencies have been tracing out (admittedly broad) ranges for pretty much all of November, a broad measure of implied currency vol remains near its highs. Markets being markets, this might nEed to come lower before realized volatility can increase again.
Elsewhere, Macro Man had to laugh at a Bloomberg story about one of the Fed's alphabet soup programs, the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility. Incredibly, this program seems to go by the shorthand acronym ABCPMMMFLF, which appears to be less a government liquidity program than the product of wiping spilled coffee off a keyboard.

Clearly, there is a gap in the market for snappily-named government programs. Image, as Andre Agassi used to say in the early 90's, is everything- and what sort of image does a program called the
ABCPMMMFLF convey? "We don't know what we're doing".

What the situation requires is a public-spirited advertising agency to rebrand the dizzying array of government rescue packages in a way that will capture the public's imagination and boost confidence in the economy and financial markets.

In the absence of such an agency, Macro Man is happy to step into the breach. He has cobbled together a series of programs that should do a much better job of conveying their purpose to the public, and thus restore confidence in policymakers.

The first port of call is to revamp the liquidity and asset support programs. In the Macro Man Program (MMP), there will be two primary facilities:

* The Commercial paper Recovery Assistance Program (CRAP), and
* The Treasury Unsaleable asset Recovery Directive (TURD).

The MMP also provides for two programs that are designed to help banks shore up their financial standing:

* As previewed in this space last month, the Special Capital Raising/Extended Writedown Undertaking (SCREWU) will enable financial institutions to increase their capital base while reducing holdings of dodgy assets.

* Meanwhile, a special accounting framework for structured credit will be instituted until market conditions normalize: the Special CDO Accounting Mechanism (SCAM).

What to do with the GSEs? "Conservatorship" is an ugly word that is difficult to understand. Much better for the government to manage them under the auspices of the:

* Federal Residential Agency Unwinding Directive (FRAUD).

Meanwhile, we should probably assume that Ms. Pelosi's desire to divert some government funds to the automotive sector will be successful. This will be accomplished via a:

* Automakers' Recovery and Stability Enhancement (ARSE) program.

Let's not forget the international efforts at crisis resolution, either.

* The primary outcome of the weekend G20 meeting will be a new Liquidity Enhancement and Modality Origination Network (LEMON). As an aside, Macro Man has thought about it for another 24 hours....and he still doesn't know what a "modality" is.

* In Europe, where banks are behind the curve in owning up to losses, policymakers are rushing to create a Harmonized European Accounting Directive for Implementing New Standards for Assets and Nonstandard Derivatives (HEADINSAND).

Finally, it is worth observing that amongst the plethora of government programs produced over the last few months, very little has been done to address the original source of the crisis: US homeowners.

In conjunction with consumer advocacy groups, Macro Man has designed a program that seeks to aid troubled homeowners. Congress can expect to see lobbyists agitating for its passage in the new year:

* A Single Home Owners With Mortgages Extended Treasury Home Equity loan Modification with Offsetting New, Equilibrium Yields program. A bit of a mouthful, to be sure, but its acronym is sure to resonate with an irate electorate: SHOWMETHEMONEY.


Anonymous said...

brilliant, as always.

Anonymous said...

Very funny but sadly true.
I love this cultivated diction.

Manc Trader said...

Nice one LOL :)

pej said...

very funny and as usual, ironic. This is the real uncensored truth.

cfarley said...

Let's not forgot the ever important Pricing Underlying Treasury Collateral Deposits Scheme being pushed by the Office of Nationwide Early Exercise. Or more curtly, PUTCDSONEX.

Anonymous said...

dude, you better have a disclaimer on this blog: Reading this blog may cause damage to your physical health...
(my stomach still hurts from laughing.)

Anonymous said...

Hi MM,

I think “modality” is just another example of how your beloved language might be abused by foreigners… French “modalit√©” or Italian “modalit√†” are quite formal but not that uncommon, while English mother tongues are likely to use a whole lot of different words to convey the same concept according to the context (here attached you’ll find an abstract from a popular Italian-English dictionary). French has long been the language of choice amongst diplomatic circles and “modality” sounds like a bad translation from French to English…


MODALITA’: s.f. modality; condition; manner; method; (procedura) formality, procedure:- di pagamento, conditions (o modes o methods) of payment; seguire le - richieste, to comply with the necessary formalities; le - di un contratto, the form of a contract; decidere le - di intervento nella zona del disastro, to decide what course of action to follow in the disaster area / - per l'uso, instructions for use.

dd said...

The overall program ought have a name consistent with its goal: the Goldman Assured Survival Program (GASP).

JN said...

How about this acronym for the foreclosure prevention that is being sought in congress: Foreclosure Assistance Relief Tender (FART)

Macro Man said...

I think it stinks (boom, boom) ;)

Anonymous said...

Alphabet spaghetti used to be a childhood favourite, but now it's just indigestible!
Great stuff MM, some welcome levity amongst the endless griping of traditional press and mainstream blogosphere.

Anonymous said...

From webster's dictionary:
1 a: the quality or state of being modal b: a modal quality or attribute : form
2: the classification of logical propositions according to their asserting or denying the possibility, impossibility, contingency, or necessity of their content
3: one of the main avenues of sensation (as vision)
4: a usually physical therapeutic agency

Helpful, isn't it?

Anonymous said...

here's another:
Federal Underwriting of Banking Asset Residuals

Cowlanga said...

"Modalidade" is also quite common in Portuguese, as used in Brazil (current G-20 chair). Which isn't to say it makes any more sense, but might hint at the origin

James Cullen said...

Great humor with insight... if only you covered (American) football, I'd have a new homepage.

If I were in Congress, I'd offer a Major Assistance Charter Repossessing Overpriced Fraudulent securities Offering Really Profitable Outcomes To Unethical Salesman, aka MACROFORPOTUS.

neal said...

Macro Man is a global financial market trader at a London-based hedge fund. Macro Man's acquaintance was also dismissive of the market interpretation, noting that the fed marked down its near-term forecasts.


Internet marketing

CV said...

Oh yes,

this is definitely one of your better dashes of irony MM; well done. ESPECIALLY the one on Europe and "headinthesand" ... this, unfortunately, is the sad truth. The head has been stuck there ever since the credit turmoil hit us.

Amazingly, it seems that the ECB will be the last to really realize how far down the European continental economies will go, in economic terms, from this crisis.


ownerfinancedloans said...

The acronym data base was compiled from various sources. Although most of the entries are correct, some of them may be erroneous or garbage.

Owner Financing, owner will carry, Home Seller Assist, Home Owner Assist, sell note, Owner Carried Notes, Home Sales Expert, Temporary Seller Finance Program.

Anonymous said...

"modality" / "modalities" are frequently used in the Nigerian fan-mail that I so often get ... perhaps there is a con-nection?

spagetti said...

this is just too funny ..

Mike said...

Jeez, Mr. Man

That was really funny. Thanks for the laughs.