So for the second month in a row, we are confronted by the prospect of a Friday the 13th. It was exactly four weeks ago today that Macro Man took his tumble on the ski slope, so he can testify that bad things do happen on the famously inauspicious date.
Today, of course, the world somehow feels a bit warmer than last month. True, the SPX is 10% lower than it was a month ago, buy hey! It’s more than 10% higher than it was a week ago!
Meanwhile, this weekend sees the G20 meeting here in the UK, where the world’s major finance ministers and central bankers will join Gordon Brown in saving the world economy. Or perhaps not. There seems to be little consensus on a unified approach to fiscal stimulus or the financial system, and while the grandees might agree to increase the IMF’s war chest, there’s always going to be the uncomfortable question of who, exactly, is going to sign the cheques.
Meanwhile, the FT is full of nonsense about “currency wars” following the SNB’s action to intervene in EUR/CHF yesterday. Switzerland intervening to weaken its currency is one thing; Japan or another large, closed economy (China?) doign so is something else. After all, Switzerland doesn’t face much competition for its cuckoo clock exports. Moreover, given the huge stock of CHF liabilities in Eastern Europe, one could argue that the SNB has now done more for Mrs. Gabor and Mr. Bukowski than the European Union ever has. CHF/HUF is now down 10% from its recent highs, which should take a bit of the sting out6 of the next mortgage payment.
Focus is now shifting to who the next currency-weakeneing candidates may be. Obviously everyone cannot do it….but the small, open Asian export machines (Taiwan and Singapore) are coming into focus, re-kindling a theme that Macro Man’s been preaching for some time.
Elsewhere, the Fed released the quarterly flow-of-funds report yesterday, and it made for grimmer viewing than a hacker movie like…err…Friday the 13th.
Part 1: Jason suffers a record decline in his household equity last quarter.
Part 2: That, combineed with equity market weakness, sent the y/y change in his net worth down to off-the-chart lows.
Part 3: Jason sees his net worth as a multiple of consumption collapse to early 90’s levels, despite being considerably older. He resolves to cut back on spending.
Not pretty viewing, is it? Let’s hope we have to wait longer than 29 years before they decide to do a re-make of this movie.