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.

You've heard of The Longest Yard. You've heard of The Longest Day. Well, this has been the longest week, given the barrage of significant releases, announcements, et al. We concluded Friday with US non-farm payrolls, after which Macro Man planned to relax over the weekend.

Anyhow, he doesn't have the energy to conjure a neat tie-in...all he can manage is a collection of random thoughts:

Dear Fed,

Macro Man speaks to a lot of well-informed, knowledgeable punters. Many of you (collectively on the FOMC) know some of these very people. They are smart, and they spend a lot of time analyzing you and trying to understand your way of thinking.

Gold has in recent days defied gravity (and the general strength of the dollar) to post fresh all time highs. It's up more than $60 in the last six trading sessions, spurred partially by yesterday's news of India taking down a 200-ton print from the IMF, but more clearly by real buying flow.

As is always the case with the yellow metal, there are a dozen stories and theories offered for its performance, and per the usual it is difficult to distinguish fact from fantasy. However, an Occam's Razor analysis might well suggest that someone is taking an (informed?) punt on either financial stability, the maintenance of globally easy liquidity conditions, or both. If the latter, in particular, one would have to posit that the dollar would come under renewed pressure after the Fed (unless punters wish to wait for payrolls).

Yesterday was instructive, n'est-ce pas? The ISM was substantially stronger than expected (OK, new orders dipped slightly, but employment rose sharply to exceed 50), equities popped sharply higher.....and then spent most the rest of the session melting away. Sometimes it's possible to over-intellectualize things: at the moment, stocks trade like they got 'em but they don't want 'em.

When Macro Man hears phrases like that, there's only one thing that pops into his head: hunting season. Flamingo hunting season. To be sure, flamingo-hunting has been in play for stuff like EUR/USD, ADXY, and broad indices for a couple of weeks. But now it looks like the hunters, having bagged their quota of big-game flamingos, have started poaching out-of-hours.

This equity price action is becoming almost Biblical: "and on the fifth day, the market rose again...." Macro Man was somewhat bemused by the enthusiastic reception to yesterday's GDP number, by the economics profession at least as much as the marketplace.

After a four-day slide, that an above-consensus real GDP print encouraged a bounce was hardly shocking, particularly in light of the history of the last seven months. Yet the reaction from sell-side economists: "A very strong report! We're upgrading our forecasts!" bordered on the nonsensical.

Life all comes down to a few moments. This is one of them.

-Bud Fox, Wall Street

Looking back on his sixteen year career in finance, it's been Macro Man's experience that each year is often defined by a handful of critical days or events. While Bud Fox had the benefit of knowing how important his visit to Gordon Gekko's office would be, it's often not quite as obvious in real time how important an event will be.

It's all looking more than a little wobbly Wednesday morning. After Tuesday's solid 10 year auction helped stem the bloodflow from the execrable consumer confidence figure, equities managed to put in a fairly "blah" close, which suddenly seems like the new "high volume percent and a half melt-up."

The canary in the coal mine for the current market came from, of all places, Australia. Quarterly CPI was released a bit higher than expected; given the recent AUD love-fest and the swirling focus on RBA tightening, this surely led to a nice rally in the Oz, right? Not so fast, my friend. Of all the flamingos out there, AUD is surely among the biggest, given that there is apparently nothing wrong with it. Or maybe there is. The Aussie banking sector, which has largely flown under the radar during the entire crisis, apparently has a few skeletons (or at least turds) in its closet, as NAB's earnings report was an absolute shocker. The AUD has been spanked as a result, which surely must tell us something.

Macro Man's not had the best start to his day. Macro Boy the Elder, giddy that half term school holidays have arrived already, woke up at half past four this morning and decided that he wanted to watch television. He was swiftly dispatched back to bed, but the harmony of the night's sleep was shattered.

Then, when it came to catch the train this morning, the great British railway system performed its predictable collapse in standards whenever the clocks change by offering a half-length train. There's almost nothing worse than being crammed into a cattle-shed train at 6.30 am with some guy's butt three inches from your face. One of the few things that qualifies is being crammed into a cattle-shed train at 6.30 am with some guy's butt three inches from your face and spilling scalding hot coffee all over yourself.

This weekend in the Macro Man household was all about "savings". West Ham unexpectedly saved a draw against Arsenal after being down 0-2 at the half, which left them....err....still second bottom in the league. Then the once-mighty Steelers defense saved the team not once, but twice against The Clash by returning fourth-quarter turnovers for touchdowns (sandwiching a kickoff return TD by the Vikes).

Then, of course, there was the daylight savings-related turning back of the clocks here in Europe, which gave us an extra hour yesterday but doesn't actually save daylight at all - quite the contrary, as we now enter the long, dark winter where it's pitch black at 5 pm. Ugh.

When market punters chat to each other, which they often do, the conversation almost inevitably opens with some variant of "So how you getting on?"

The typical response bears a striking resemblance to that of high-level amateur athletes. When you ask somebody, for example, how well they ski, it seems that the best skiers almost always reply with "oh, I'm OK." In Macro Man's experience, people who reply "yeah, I'm pretty good" generally are not. (By way of disclaimer, Macro Man was a "yeah I'm OK" guy before he came a-cropper.)

If you've ever been punched in the solar plexus or had the wind knocked out of you, then you probably know how risk assets feel right now. When Macro Man threw the steaks on the barbie last night, the SPX was pushing 1100 and oil was nearly $82/bbl. When he checked his screen 40 minutes later, he could almost literally hear the "ooooooooooooof!" being cried by Spoos.

Ex post, a number of reasons were given for the sell-off: Bove downgrading WFC, Obama announcing pay caps on TARP banks, a disappointing Wal-Mart (WMT) call, etc. The real answer, however, is a bit more prosaic: a couple of huge ($5 billion) sell tickets went through in the last 40 minutes or so of trading, which naturally pushed the price lower. You can see the impact on the intraday volume chart below.Meanwhile, other sacred (risky) cows are being ushered to Dr. Market's abattoir. Over the past few weeks Macro Man has pointed out the apparent distribution trend in Korean equities. Despite this, the won had remained relatively resilient, in conjunction with the splendid performance of broader stock markets. Starting last Friday, however, there has been something of a fire-in-the-theater rush for the exits in KRW, INR, and other Asian currencies. Even USD/RMB forwards have seen some short-overing.

Macro Man has previously observed that blog traffic can sometimes say a lot about the significance of market events or interest in a particular theme. If this is the case, then it appears that concern about the weakness of the dollar is very real, as yesterday's post generated a near-record level of traffic. This was largely due to the fact that a few high profile sites very kindly linked to Tuesday's post, but still....someone has to be interested enough in the subject to click through. For the first time in a couple of years, Macro Man finds the subject of external imbalances to be of paramount interest, and since Brad Setser moved on to bigger things, there is perhaps a dearth of commentary on the subject.

Regardless, the drumbeat of dollar weakness rolls on, as the buck is back close to its lows of the year against the euro. Exotic barriers around 1.50 have, by all acccounts, helped put a lid on spot for now, but one would have to believe that it's only a matter of time before the level breaks. Hell, even sterling has continued last week's bid tone; if the BOE minutes don't hint at an appetite for more QE in December, one might reasonably conclude that the Queen's head could enjoy another dies mirabilis.

Here are five great myths and/or lies of the modern financial system:

1. "The check is in the mail"
2. "I'll call you right back"
3. "We are long-term investors"
4. There is a secret cabal of gnome-like creatures that manipulate the gold price (up or down, depending on your druthers)
5. "The United States believes in a strong dollar"

When the strong dollar policy was formulated by Bob Rubin in 1995, it was sincere and served a purpose. After all, the Treasury market had experienced a horrible sell-off the previous year and the buck made all-time lows against the JPY and DEM in 1Q95, prompting the last bit of multilateral currency intervention in which the US was an enthusiastic participant.

The week has started with a bit of a bang, as the Barron's cover story arguing for a Fed rate hike sent equity longs and dollar shorts scurrying for cover. Well, for a couple of hours at least; after the initial flurry, both equities and non-dollar currencies saw solid demand and are, at the time of writing, solidly up on the day.

The Barron's article contrasts starkly with views expressed in the weekend press by Adam Posen, newest member of the BOE MPC (and, as it so happens, a former colleague of one Benjamin S. Bernanke) arguing in favour of more, not less, QE.

Although Macro Man didn't ouch on it yesterday, his "no frills" earnings model for Goldman Sachs once again proved its worth, as the "consensus plus a buck" methodology proved to be deadly accurate. Why pay analysts a couple million bucks a year when the no frills model does so well?

In any event, given that someone had whispered $6/share yesterday, and that Citi's reports were less than stellar, stocks generally traded on the back foot. Nothing that IBM and Google (GOOG) couldn't remedy after the close, of course, and SPX futures have made a new high for the year in this morning's trade.

Macro Man has thus far avoided the great "deflation versus inflation" debate, at least publicly, for a couple of reasons. The first is that he doesn't think the outcome will be as black and white as many of the debate's participants; he suspects the underlying dynamic is heavily dependent on the velocity of money, and so he prefers to focus his analytical energies in that direction. Moreover, the tone of the debate has taken on a quasi-religious tone, which is rarely conducive to the sort of open-minded give-and-take that yields substantive results.

However, it's probably worth touching on some small aspect of the debate, as behind the scenes it seems as if the same is happening at the Fed. Don Kohn's recent speech highlighted the large size of the output gap, a view largely echoed in last night's FOMC minutes. Yet at a recent St. Louis Fed conference, Bank president James Bullard offered a somewhat contrary view - namely that the collapse of the bubble has eradicated some of the productive capacity of the economy, thus rendering the output gap smaller than commonly believed.

Another day, another dollar (going down forever). The reflation trade is on, so on, baby, kick-started by Don Kohn's suggestion last night that the output gap is wider than the Grand Canyon and another wave of better than expected earnings, led by Intel after last night's close. JP Morgan announces at noon London today, kicking off a busy week of kleptocrats' banks' earnings.

But while equities are performing strongly, the real story of the day thus far has once again been the dollar. Not only has EUR/USD made a new high for the year above 1.49, but now even oil has broken out, suggesting that a sinking dollar lifts all boats.

The problem with heroin, of either the literal or monetary type, is that once you're hooked it's a very tricky proposition to wean yourself off the addiction. Gordon Brown certainly seems to be having trouble even contemplating kicking the habit; his public calls cheering QE yesterday appeared to stand on the toes of Merve the Swerve and co.

The next few months will present an interesting test case as some of the healthier liquidity addicts start kicking the habit. Exhibit A is Australia. The country presents an interesting dichotomy; as a producer of precious and industrial commodities, it has been highly geared to the global liquidity cycle, and particularly that in China. At the same time, domestic demand has remained robust, at least partially fueled by relatively heavy debt burdens (which have obviously benefitted from ultra-low RBA rates).