Macro Man isn't sure that we learned much from the FOMC last night, but that doesn't mean that markets have receded into a pre-Christmas stupor. It's hard to know what the DGDF crowd was looking for... but whatever it was, they certainly didn't get it. Cue the by-now predictable battery of stop losses from dollar shorts and, dare we speculate, initiation/expansion of dollar longs by the CTA community.

In any event, one could argue that there was a significant development last night, via S&P's downgrade of Greece and maintenance of a negative watch. Greece will soon be knocking on the door of the lower threshold of eligible ECB collateral; one doesn't need a terribly vivid imagination to conjure an idea of what might happen should that occur. 15-month Greek paper is currently trading north of 3.5%.

So Japanese banks rose 7% last night in the face of a huge impending share offering by Mitsubishi/UFJ (MTU). What gives? Well, the Nikkei reported that the BIS will smooth the path towards implementing Basel II by phasing in the stricter requirements over a 10-20 year horizon.

Ten to twenty years? Are you effing kidding me? What's the point of implementing new rules if they won't bite before another two or three crises have erupted and the Macro Boys (current ages: seven and six) will be old enough to have their bonuses garnished by bankrupt governments?

Ho ho ho!

Christmas has come early (OK, not this early) today, courtesy of that well-known proponent of Yuletide cheer....Abu Dhabi! The emirate has lent a cheeky $10 billion to Dubai, which has funnelled the dough to Dubai World, enabling them to redeem the infamous 12/09 Nakheel bond (which was trading in the mid-50's on Friday) at 115.52. Even the 2011's, pictured below, have nearly doubled.

Ouch.

Normally, at this juncture of the electoral cycle, one could confidently expect a "giveaway" pre-budget report from the Chancellor of Exchequer. Not so yesterday from Alistair Darling, who has quite clearly "run out of our money", to quote MEP Daniel Hannan. But hey, look on the bright side: deficit reduction starts next year, as the public sector borrowing requirement is forecast to collapse to £176 billion from the current year £178 billion.

OK, now the party's over. For Macro Man, that means the pity party. OK, he's had a bad run, and he's moaned about more than a bit. But no one likes a whinger, and Macro Man feels like he's close to wallowing in self-pity. So while he might still examine his performance to distill lessons for the future, the moaning stops here. Anyone who sees/hears him whingeing any more should feel free to give him a slap.

In any event, it looks like there are plenty of other pity parties being held around the world. Dubai is turning into an annoying smell that you can't get rid of. As uncertainty continues to swirl around Dubai World, the Dubai stock market continues to collapse; there's been a nearly uninterrupted string of limit-down days since the debt restructuring concerns first surfaced.

In the days of the Roman Republic, the imperator of a particularly successful or important military campaign was occasionally awarded a triumph. This festive ceremony featured a parade of captured bounty and prisoners, interspersed with Roman soldiers signing bawdy songs about their commander, who would wave to the cheering crowds from the back of a chariot. And behind the chariot would walk a slave, whose sole job was to whisper in the ear of the conquering hero "Remember that thou art mortal."

At the risk of beating a dead horse, 2009 has, in aggregate, played the role of the slave in Macro Man's investment career. As if he needed further proof, a couple of the trades that he cut yesterday have come roaring back today. It's a slap in the face, but not altogether unexpected, and Macro Man has to laugh (if only so he won't cry). In any event, those trades are done with, and there's no utility to be gained from crying over spilt milk.

OK, let's get this over with. No, Macro Man cannot confirm that the reason the USD fell so hard overnight is because Elin Woods asked for a bid in $500 million USD/SEK before she went to bed last night.

Seriously, what does it say about financial markets when equities surge after the close, apparently on the story that BAC will pay back $45 billion of TARP funds, when the news came out during yesterday's New York session? Peculiar, to say the least. In any event, every man and his dog has SPX 1121 on his radar, which is the 50% retracement from the crack-smoking subprime 2007 peak to the cyanide-swallowing 666 lows in March of this year.

Macro Man recently had an unfortunate experience with one of his brokers. Dialing a 24-hour line, he left an order at about 8 pm London time with the New York desk to execute a couple of trades in the Asian time zone. Waking up the next day, Macro Man searched his Bloomberg messages for the confos....but alas, none were forthcoming. When he got to the office, he rang the broker, and found to his horror that the orders (buying some Asian equities on a day when they rallied strongly) were never executed.

After a flurry of discussion, it was agreed that the broker would execute the orders at current pricing (or, in one case, when the market re-opened), calculate Macro Man's opportunity cost, and compensate him for the loss. Fortunately, the trades weren't very big at all, so the opportunity cost was not particularly large for him. However, in a "fill 'em and bill 'em" industry, that money can only be replaced by volume... something like 140,000 lots. Given that the broker was prepared to make him good on the whole amount, Macro Man decided to split the difference on the "opportunity cost"....the cost to him was negligible, and the broker sounded very relieved indeed.

Macro Man was chagrined to find, upon emerging from his house this morning, that his windshield had iced over for the first time this autumn/winter. Fortunately, because his regular train is still AWOL, he's getting a later service, which afforded him the time to retrieve a scraper and do the business.

Little did he know, however, that the ice on his windshield had come straight from the veins of the marketplace. Dubai is yesterday's news, evidently....he's had no Nakheel price updates from FX monkeys at all this morning, and while the Dubai equity index has cratered again today, developed market stock futures are back threatening their highs of the year.

OK, so it looks as if disaster may be averted in Dubai: the latest hot rumor is that the central bank will guarantee all Dubai World debt. This is not altogether shocking - was this not among the rationales for the big intraday equity bounce on Friday? - but has nevertheless provided comfort to bondholders. The (in)famous Dec '09 Nakheel bond was recently quoted 65/70....well below par, but certainly a damn sight better than the 40-mid price that Macro Man saw on Friday morning.

Equity holders, on the other hand, may be left holding the bag, or at least that's the fear. The Dubai stock market, open for the first time since Wednesday, has cratered lower, down more than 8% at the time of writing.

Sometimes, those little guys matter. That seems to be the message of the past twenty-four hours where rumours/uncertainty over a possible default by Dubai has created a good-old fashioned panic in asset markets. It's been what...eight and a half months since we've felt remotely like this? Seems like a lifetime ago...

In fairness, this isn't quite the same as the post-Lehman (LEHMQ.PK) maelstrom. While Dubai's debts are not inconsiderable, they pale in significance when placed side-by-side with queries over the viability of the entire global banking system. Still, those itching for a good crisis will take what they can get, and the implication for financial market pricing is exacerbated by the fact that the US is on its Black Friday post-Thanksgiving hangover and that Dubai itself (with the rest of the Muslim world) is out 'til Tuesday for the Eid al-Adha holiday.

It feels like an either/or kind of market doesn't it? With a number of key asset prices (SPX, EUR/USD) approaching their extremes of the year in liquidity-impaired holiday markets, it feels like we're either on the edge of a breakout/melt-up or witnessing perhaps the last chance to sell vol at decent levels before the end of the year.

The dollar has taken a bit of a bashing today against both the euro and the yen, no doubt helped by the Fed's relatively sanguine view in last night's minutes on recent dollar weakness. EUR/USD hs traded on a 1.48 or 1.49 handle every day since October 9, so at this juncture it is probably still premature to get too excited about today's move. As you can see, one month realized euro vol is (unsurprisingly) now at its lowest since Lehman went bust.

As we embark upon Thanksgiving week, thus ushering in the low-liquidity holiday silly-season, you can almost hear Slade (or is that Quiet Riot?) in your ear as you watch the screens. If you're a noise trader, there are rich pickings to be had; if you're a signal trader, there's not much you can do but pick your spots and bear it.

Still, there have been a couple of interesting features as we kick off the week. Gold has made (another) new high, seemingly dragging the DXY down in its wake.

Macro Man is back in the saddle, or at least his office chair, Friday morning after his first decent night's sleep in what seems like forever. It was expiry day on Friday in equity land, and indices are producing the seemingly-obligatory squeeze up, despite the rather poor performance of other measures of risk appetite and/or reflation.

One issue that has captured macro punters' fancy is yesterday's price action in Treasury bills. The Feb-10 bill traded to a low yield of 0.005% yesterday, and some bills of shorter maturity reputedly traded at negative yields (though Macro Man in fairness has yet to find them).

On the same day that Ben Bernanke made his speech mentioning the dollar, his intellectual blood-brother Don Kohn made one that touched heavily on the issue of asset bubbles. At the risk of over-simplifying the speech, Kohn essentially said that monetary policy is an inappropriate tool for addressing ongoing asset bubbles, and that regulation is the preferable policy option. Oh, and we're not currently observing another asset bubble forming before our very eyes.

His defense against using monetary policy to address bubbles was essentially "gee, it sure didn't work in the dot-com bubble of '99 or the housing bubble of '04-'05". The obvious rejoinder to this argument, of course, is that despite hiking rates the Fed never managed to arrive at a tight monetary setting; Macro Man's nominal GDP indicator suggests that policy remained moderately easy during the late-90's tech bubble and ludicrously easy during the housing boom.

Following on from yesterday's post, Macro Man received confirmation this morning that Britain is, in fact, going to the dogs. He rolled up to the station this morning to find that his usual 6.33 service has been cancelled until further notice because of striking train drivers. (Apparently the reports of high unemployment are a fiction.) Fortunately, he was still able to make it to work on time.....because the previous train ran 20 minutes late and he was able to catch it!

Anyhow, there were a couple of interesting developments in the US yesterday. Headline retail sales surprised on the topside (though given revisions, the report was actually pretty much in line), led by, of all things, auto sales. Macro Man had expected auto sales after cash-for-clunkers to remain pretty weak for some time. And while the auto sales index did remain well below its C-4-C high, there was nevertheless a pretty solid bounce from the September low.

Macro Man is back on the desk, safely re-attired in standard-issue hedge fund costume: sport coat, jeans, and collared shirt. He's never been a fan of wearing a suit and tie, but in the current populist backlash against bankers and hedge funds the idea of slipping a knotted length around his neck is distinctly uncomfortable!

Today Macro Man would like to address a couple of old stand-bys and one new development. Leading off are his old mates from China, where the market is all aswirl with talk that the authorities will soon countenance an adjustment in the exchange rate. In its recent quarterly report, the PBOC announced that it intends to "improve the exchange rate mechanism is a proactive, controlled, and gradual manner..."

I'm so tired, I haven't slept a wink.
I'm so tired, my mind is on the blink.
I wonder should I get up and fix myself a drink.

I'm So Tired, The Beatles

On your marks...get set....go!

Markets are off to the races so far this Monday morning, as all manner of risky assets on Macro Man's screens have roared higher. It almost feels as if markets, having successfully survived the murderer's row of event risks last week, exhaled over the weekend and decided that plan A (liquidity-driven uber-rally) wasn't so bad after all.