Monday, April 27, 2009
Macro Man is back, if in a slightly abbreviated form. While he intended to keep a reasonably close eye on things today, Dame Fortune had other plans for him, as he's been without power for most of the day. He's back online, albeit temporarily, which affords him a few moments to survey the investment landscape.
More generally, this space will take a slightly altered shape over the next couple of weeks. Rather than daily long form entries, Macro Man's intention is to deliver more quick-hit, almost stream-of-consciousness posts. This reflects not only his desire not to stay still for the 45 minutes to an hour that it usually takes to compose his morning missive, but also the indifferent nature of the current investment climate. It's been a bloody difficult couple of months for macro punters, and one can only say that so many times before running the risk of repetition.
First on the agenda is a quick question on the stress tests. This is perhaps a naive question, but it's one that your author has not seen clearly elucidated elsewhere. What, exactly, is the purpose of the stress tests?
It seems fairly obvious that they are not intended as a sober measure of how the banking system would fare under conditions of extreme economic stress. If they were, then the scenarios would offer a bit more choice than "Optimistic and Optimistic (Roubini version.)"
So what, then? Political cover to enable payback of the TARP and/or further injection of funds? To make everyone feel wonderful that the banking system is actually in pretty good shape? (Macro Man would normally scoff at this, but after the market action of the last few weeks, he's not so sure.) In a post-FASB, "say whatever you want" world, what possible purpose does this charade have? Macro Man is curious to hear your thoughts.