Monday, November 17, 2008

Everything You Need to Know About the G20 Statement in One Word

Well, that was exciting.

The weekend G20 meeting was evidently highly successful, at least if we are to judge by the length of the statement the resulted from the meeting. G7 statements are usually short and (relatively) punchy, and able to fit on a single printed sheet.

The G20 statement, on the other hand, was long and expansive, filling a full eleven pages when transposed onto Microsoft Word. If it were full of detailed policy prescriptions, the length could perhaps have been justified. As it was, Macro Man tried to read the whole thing but failed out of sheer boredom.

The sentence that did it for him was the following:

"Further, we shall strive to reach agreement this year on modalities that leads to a successful conclusion to the WTO's Doha Development Agenda with an ambitious and balanced outcome."

Macro Man has very few hard and fast rules in life. One of them, however, is that any document containing the word "modalities" is a complete and utter waste of time and space.

Moving away from the world of political junkets and grandstanding (come on down, Gordon Brown!), the world still looks like a complete mess. The deterioration in US consumption continues apace, as Friday's retail sales figures figures were execrable.

Meanwhile, Japan registered its second consecutive quarter of negative growth, joining the Eurozone in achieving that dubious feat. It's amazing to think that it was only a few quarters ago that "decoupling" was a popular market theme. A quick check of Google Trends offers a reasonable list of those economies most badly affected by global re-coupling: South Korea, India, Singapore, Taiwan, and Hong Kong comprise the top 5 sources.

Elsewhere, it's perhaps a tad ominous that LIBOR has started to edge higher again. Macro Man has previously observed the tendency of LIBOR spreads to widen into the end of the quarter; now that Q4 is half over, will this be the next thing to turn the screw on risky assets?
It remains to be seen (though there has been a massive squeeze in Russian yields today), but Macro Man is pretty sure of one thing. If there is indeed a relapse into the next leg of the financial crisis, the ultimate solution will come from a source other than a multilateral boondoggle like the G20.


Anonymous said...

If one looks at the allowing Lehman to fail in the light of a military strategy it would be viewed as brilliant. With the G20 like OPEC having so many different varied interest they can't work together, they like OPEC will once again return the marbles to the losers.

Anonymous said...

Speaking of G20, one needs look no further than the official foto and how its ordered to get a glimpse of the future and who matters. Bush by default front row center. The rest of G7 for the most part delegated to back row.....

Anonymous said...

Hi, what do you mean by "google trends" ....? Thanks

Macro Man said...

Google trends is a google app that allows you to plot a time series of how much a given phrase is searched for on Google.

tv said...

from acrossthecurve blog

By John Jansen on Oct 17, 2008 | Reply

There are also stories floating around that JPMorgan received a call from their new partner (US) and was told to crush deposit rates. The trader who I spoke with for this post said they drove down (I think it was one month rates but not positive) from 5 percent to 3 3/4 percent.

Libor Musings
November 14th, 2008 9:06 am | by John Jansen |
What follows is the thoughts of a trader on the rise in Libor the last two days:

Libor set higher for the first time in 24 days.  The market took this as an
affront to spreads and proceeded to buy Libor/OIS pretty heavily. Why?  well, yet again this marks a potential turning point in the credit cycle as libor has tended to trend in a meaningful manner and more specifically, over the past few weeks one bank has done a tremendous job in getting libor lower. 

Does this mark the end?  If this is the case, then we could be in for a wild ride over
the next few weeks.  Two days do not make a trend, but I would treat any
surprise moves higher in libor as a warning and would not fight what could
potentially be another substantial widening. Volatility will surely be higher.

Macro Man said...

TV, that very bank has supposedly been in lending aggressively in 6 month today. What's interesting is that here in the UK, w had a similar scenario wherein HSBC seemed to be lending aggressively in the sterling market, supposedly at the behest of the BOE. It didn't really work terribly well least until Merv dropped his 150 beeper on us.

tv said...

thank you for the color on the UK.

Chariots of Fire to the bottom......?

mstr.blissett said...


the G20's gone new-age!
i felt like i was reading a description of a vortex healing workshop when i read that paragraph.
time to buckle up

Anonymous said...

getting hedge fund data today, and they've already sold a ton of stocks:
'At Tudor Investment Corp., the Greenwich, Connecticut, hedge-fund
group founded by Paul Tudor Jones, 13F holdings fell to $453 million
from $5.7 billion. Jones said markets face more selling from managers. Jeffrey Vinik, disclosed that his Boston-based Vinik Asset Management LP held $1.8 billion at Sept. 30, down from $11.8 billion at June 30.'
...automakers must be bailed out, bankruptcy said to spiral out thru suppliers to one million jobs lost