Friday, December 4, 2015


Called the Madman in the early afternoon.

" G'day Max, still mad?"

"What?  We playing word games today?"

"Ooow, doesn't this bright, warm December day cheer you up?  The markets seem to have taken all of it in stride."

"Stride, hell.  There's blood all over.  What I didn't realize how tight that trade was.  Everything was going in the same direction and when it hit the fan no matter what you were in you were getting out and there's no liquidity like I've been telling you for months so a lot of people just took their marks and went home.  They killed a lot of people.  I hope they're happy."

Max, I have to tell you I don't have a lot of sympathy for the poor, slaughtered lambs, but I don't think it was a considered strategy either."

"Then what the hell was it?"

"I think it was Mario finding out that he really doesn't run his bank.  It's the old Golden Rule thing:  He Who Has The Money Makes The Rules.  Mario has a board--eight stooges and the German.  Mario could have had all eight votes in which case he loses 1-9.  Think about it.  The guy isn't stupid; he must have know that there would be a reaction and on top of that his announcement was...shall we say...ill phrased.  But he didn't have an option and the market overreacted just like the market always does...particularly so when when the market is so damn sure it's right and turns out to be so damn wrong."

"You really believe that?"

"Hell, Max, I don't believe  anything anymore.  It's just another theory as to what might have happened but I think it's a better one than we were bouncing around yesterday."

"Problem is, Charlie, you know us too well.  We..."

"You don't like to be wrong."

"You're right."

"I know."

"You ever wrong?"

"Max, I live in the fly-over zone not Bronxville.   What do you think?"

Early this afternoon, Mario Draghi, speaking in New York, indicated that there was considerable flexibility at what steps the ECB could take in reaction to future economic conditions, clearly indicating that the reaction to his statement of yesterday was an "Oh, S---" moment in his career as a central banker.  He will certainly be more careful next time.  The equity market, almost as an acceptance of an apology, closed up almost 400 points...with the clear message inserted within the remarks of all commentators that he better not make the same damn mistake again.

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