Monday, November 24, 2008
"Oh what a tangled web we weave,
When first we practice to deceive"
- Sir Walter Scott
"But when we've practiced for a while,
How vastly we improve our style!"
- J.R. Pope
This morning's press headlines provide plenty of reason for faith in humanity and the general goodness of people in the financial industry.
Consider the following web of stories:
Citigroup gets a bailout package from the Federales....
...despite the fact that one of their primary "assets" is...err.....the tax benefit of their prior losses...
...and that Citi was one of the banks that made some, ahem, unsavoury bets against MS in September.....
...this being the same MS that went on a hiring spree in July....
....only to turn around and wield the axe in November....
....but of course, we all know how this is going to end!
Fortunately, there are some certainties in life, such as the singular inability of the British rail system to delivers its passengers to their destination on time and in comfort. Will any on Alistair's tax hike make its way into proving the rail system? There's about as much chat as that as of Macro Man being named Obama's Treasury Secretary today.
Moving on to markets, Macro Man has to give a tick to the Russkies, who've devalued the RUB again today. Theirs is a purer dishonesty which makes no bones about their desire to rip you off, unlike the sordid displays of "coming clean" that we've observed from (morally and literally) bankrupt Western financial institutions.
Elsewhere, the good news keeps on coming in Europe, where the ifo registered its largest monthly drop in history (tying the release after 9/11) and putting the index at its lowest level since the post-unification recession. Naturally, the euro's gone bid and Bunds have sold of sine the release; ah, the joys of illiquid, position-driven markets! As intellectually stimulating as reading a technical manual...in Finnish.
Finally, Macro Man feels compelled to pass on a technical observation that he made last week, and which he's only now coming to grips with. A number of punters have no doubt observed that the SPX has broken a double top from 2001 and 2007. What's particularly chilling, however, is that the price target of the neckline break is the same distane from the top to the neckline.
In this case, the size of the top is 811 points, with the neckline at 762. This puts the SPX price target at......-49!
It's been commonly said that this financial crisis will permanently change the nature of financial markets. Macro Man can only wonder if that includes the lognormal distribution of asset prices. What a tangled web that would be for your risk management system!