20 Questions

Yes, boys and girls, after a wild two weeks it's time for another round of Macro Man's favourite game. And so without further ado....

1) At what level (assuming "orderly" markets) would Japan's MOF intervene in USD/JPY?

2) If the answer to #1 is >100 (or >150 EUR/JPY), how would the US and Europe respond to their G7 colleague's descent into mercantilism?

3) How bad will today's Merrill earnings announcement be?

4) Do Newcastle United fans really expect Kevin Keegan to repeat his mid-90's magic?

5) When will the ECB next cut interest rates?

6) How much will the Bank of England cut interest rates in 2008?

7) How glad is Macro Man that he has nothing in the Icelandic krona? (Remember, kids: you can't spell "risk" without "ISK".)

8) Is Ben Bernanke going to hold his hand up before Congress today and admit "we haven't got a clue what's happening"?

9) Since Halloween, the Hang Seng is down by 21%. Is this the beginning of the end of the Great Chinese Melt-Up?

10) How long will Beijing allow the RMB to appreciate at a 20% annualized rate against the dollar?

11) Will London property prices crash, or will they remain supported by lack of supply and the execrable transport infrastructure?

12) How many US homebuilders will go bust in 2008?

13) How seriously should we be taking the collapse in the Baltic Dry Index?

14) Has the leveraged community added or taken profits on risky asset shorts in 2008?

15) How quick and how large will the US fiscal response be?

16) Will it take the form of tax cuts, spending programs, or an RTC-style slush fund to buy up all the non-performing credit turds?

17) 1 and 2 year inflation breakevens in the US are around 2%. How is that not a do?

18) Who will win: Red Ken or Boris?

19) Who will win: Barack or Billary?

20) Who will win the White House: Dems or GOP?

Bonus question: Who will last longer- Keegan at Newcastle or Rafa Benitez at Liverpool?

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January 17, 2008 at 10:17 AM ×

According to a recent interview on the BBC Keegan hasn't even watched a live game of football since he left citeh. I can't believe that the fans are so ecstatic about his arrival. Although he will be better than having Shearer.

On Benitez i think he goes first but it will be a travesty.

Lots of food for thought in those questions happy trading macro man.

January 17, 2008 at 11:30 AM ×

good questions.
I have one more. Gulf Revaluation on the cards?

January 17, 2008 at 11:45 AM ×

1) 101
2) in the words of my friend borat, NNNOT GGOOD
3) bad but not as bad as the baddest of us think
4) No.
5) Within the next 3 months
6) BY 1%
7) Not glad
8) No, he is just an academic poof in his defence. Of course he has no clue.
9) No. a bit further to go.
10) Not for too much longer.
11) They will go down back to 2003 levels
12) 2
13) Very very seriously
14) Added
15) Not very quick and not very large
16)Tax cuts -- american politicians are too stupid to do anything else.
17) Red Ken
18) Obama
19) Dems
20) Rafa Benitez.


January 17, 2008 at 12:10 PM ×

Hi MM,

Well, anonymous already has a main yardstick I think.

1) 100 or perhaps 103. But we will see intervention that is my guess. The interesting thing will be whether the Swissie will take over as the only low yielding high flyer although of course the Dollar smile discourse may be important if the whole global edifice begins to crack.

2) Look, the G7 is dreadfully behind the curve when it comes to the whole idea of current account imbalances. But definitely not good.

5) On the back of Q4 GDP, that would be my guess. So at the March session.

13) VERY SERIOUS ... basically, Eastern Europe is going to go bigtime this year I feel. This is merely the beginning. Look out for the Forint and the Leu. And if you are into the CEE economies in general, now would be the time to row your little boat swiftly back towards the shore.


January 17, 2008 at 1:18 PM ×

1) <100

4) no. see a parallel between Japan in the last 15 years and Newcastle

5) Q2

7) ISK will be a case study for greed and stupidity

8) it will sound like that to us.

11) hardest call. depends on radioactivity

13) very

14) added. (worries me every day)

15) much like the SIV bailout

18) Red Ken

19) Billary

20) Dems

January 17, 2008 at 1:38 PM ×

ermm, did I just misunderstand no. 13 completely or what :)?

Well, I still maintain my bearish view on Eastern Europe but concede that no. 13 has little to do with this.

January 17, 2008 at 2:30 PM ×

just a handful where i may have a different view than market:

4) Keegan. the newcastle owner Mike Ashley doesn't really care about results. see Sports Direct shares if you don't believe me!! (IPO'd 10 months ago at £3, now 98p).

5) the ECB will only cut rates this year if deflation appears (which personally i think it will). they are MAJORLY reluctant to cut. in absence of deflation, 2010.

6) Too much. My poor savings account :(

11) london property will crash horribly. just wait for the financial services sector to REALLY start culling people, you'll see then just how many people had leveraged up on £1mm apartments based on a single years bonus

17) inflation breakevens at 2%? yep, they'll be going to 1%

18) sadly, red ken will take it, although boris would be much more fun. i guess teaming up with venezuala doesn't lose you any votes (is it just me or is it horrible that ken made a fuel deal with chavez???)

20) surely the US wouldn't vote another republican in after the current fiasco GWB is gone?

interesting comments on Eastern Europe in the comments, and from you the other day MM (and Roubini recently). Thinking that buying CHF and selling both HUF and CZK are a no-brainer? shorting countries that are running large deficits could be the way to play FX this year. Entry levels look decent.

January 17, 2008 at 3:09 PM ×

not completely off topic, but im sensing a bear market rally/squeeze

the way the equitiy futures trade, it does feel like it wants to go up.. maybe usdjpy will squeeze higher too, to some level old support which turned resistance now

January 17, 2008 at 4:34 PM ×

1. <95

2. Congress could get ugly. My preference would be for Treasury to respond by buying yen. Lots of yen.

3. i'm too late

4. that would be crazy

5. march/april

6. 125bp

7. very?

8. no, but i'm too late

9. no, at least one more shot skyward

10. most of 2008, perhaps 15% over the year

11. crash

12. 22

13. very

14. added

15. slow, clumsy and, i hope, insignificantly small

16. programs (ugh) and tax rebate

17. milk it

18. ken

19. hill

20. dems, easily


January 18, 2008 at 4:28 AM ×

Not enough time to answer all 20 questions. I'm looking for a GCC "global coordinated cut" from FED, BOE, and ECB. 50 Beeps from the FED and 25 beeps each from the other two. Was thinking this might come before the Nikkei-open tonight (did not) or tomorrow morning. Ben has stripped the next 75 beeps of any sex-appeal, so, I figure he needs a GCC to get everyone back on the dance floor. Today (Thursday) feels like another Thursday: 16 August when INDU tanked to a low, then the FED followed the next day with the surprise D.R. cut on a Friday Op-Ex. I figure Ben brings the D.R. spread to F.F. in some also, on the next cut.

Meanwhile, the BOJ will start making noise between 105.00 and 100.00, to prep us for operations should JPY advance beyond 100.00. Such is the predicament of every JPY long--of which there are many new converts since this Credit revulsion all started in FEB 2007.