Monday, March 01, 2010
Readers will be pleased to hear that after a week of blizzard-like conditions in La Plagne (similar to those which were his undoing last year), Macro Man is still standing after his return to the slopes. To be sure, he wasn't quite as good as new: he dialled down his all-action style to concentrate on his technique, and by the end of the week his knee was sufficiently tender to curtail his time on (and off) the piste. Still, coming as it did just ten months after his ACL reconstruction, the trip could only be called a success.
As he returns to the rugged terrain of global financial markets, Macro Man cannot help but see parallels between some of the prices flickering on his screen and the skiers with whom he so recently shared the snow-drenched Alps. Consider:
* Totally in control: Voldemort continues to lead the rest of the world on a merry dance of "will they or won't they?" move the exchange rate. Like an expert skier, SAFE exerts total control over the direction of the RMB, and like that expert skier USD/RMB blazes a trail that is more or less a straight line.
The recent news that China has conducted a "stress test" of various industries to determine their response to an exchange rate appreciation if, of course, welcome; the reported wailing from low value-added manufacturers of vanishing profits in the event of a 3%-5% rise in the RMB is not. After all, there's no divine right to a trade surplus.
Macro Man stands behind his non-prediction that any FX adjustment will not occur in H1; while the market has embraced the stress test news by sending 3m NDFs "crashing" to their lowest levels since mid-2008, observe that the absolute value of the implied reval is still pretty low. SAFE remains completely in control.
* Can get up and down the mountain with the occasional (serious) wobble. The yield graph of Greek benchmark debt resembles nothing so much as the Alpine landscape that Macro Man recently departed. Making a significant bet on the outcome of the Greek crisis clearly takes a lot of intestinal fortitude, given the outrageous swings in news, sentiment, and price on a daily basis.
Indeed, the whole situation strikes Macro Man as quite similar to a skier careening down the mountain, arms windmilling furiously. Every time you think that they are going to crash spectacularly, they manage to pull out a recovery- the latest of which is the reputed plan to get state-owned institutions in Germany and France to snaffle up zillions worth of Greek debt.
Still, until the intrepid skier is safely at the bottom of the slope, sipping on a vin chaud or biere pression, you cannot fully count on their safety. So, too, it is with Greece; doubts remain about the legality of the European bailout, and even if it goes through there are no guarantees that it will permanently solve lax fiscal policies and uncompetitive trade standing.
*King of the snowplow who spends most of his time falling down. Given that a couple of readers have pointed out Britain's relative ineptitude at the Winter Olympics (despite Amy Williams winning a gold this year), and in honour of the Mr. and Mrs. Twit who a) shouldered their way between Mrs. Macro and Macro Boy the Elder in the lift queue, and b) literally pushed Macro Boy down in the "starter's gate" for the chairlift because he was waiting for his mother, Macro Man is pleased to give this award to sterling, which cannot get out of its own way recently.
Whether it's the suggestion that Merv and co. will embark on a titanic program of QE2, or the recent polls suggesting that Labour is now just 2 points behind the hapless Tories (which, according to the tortured nature of British democracy, would give Labour a 55-seat lead in Parliament), or even the news that the (British) Prudential wants to buy AIG's Asian business for a cheeky $35 billion, sterling has fallen faster than Marion Rolland:
Macro Man can only wish the same for the Twits.....