THE GOOD, THE BAD & THE UGLY
[Latest Global Dollar Liquidity Measure: +15.1% annual growth rate; latest Endogenous Liquidity Index: -32.5%]

The Good. [1] Friday's very sharp rebound in CDX indices. [2] The virtual collapse in inflation expectations: the spread between 10-year Treasuries and inflation-indexed notes trades at 221 basis points, the lowest on record. [3] The Fed will ease. [4] Islamic finance: Arcapita, the Bahrain-based Islamic investment firm buys Germany's HT Toplast for more than $1bn; according to the Financial Times, the deal "adds weight to predictions that Islamic investors would be less affected than traditional equity houses by the recent turmoil in debt markets". [5] China re-affirms dollar's global reserve status: the new lender of last resort? [6] Gillian Tett's superb coverage of the liquidity crisis.

The Bad. [1] Economic slowdown ahead. Merrill Lynch's David Rosenberg cuts 2008 estimates: +1.5% GDP growth (down from +2.3%); operating earnings seen at $92, down from $97. (My favorite market-based indicator of global growth, the platinum-gold ratio, is showing weakness). [2] The VIX refuses to trade significantly lower. [3] Clearing the backlog will take time: $300 bn of lending commitments that banks cannot sell on (FT's Richard Beales). [4] Monday morning quarterbacks: Intelligence Capital Limited's Avinash Persaud: "The crash of 2007-2008 need not have occurred".

The Ugly. [1] Special Investment Vehicles. Gillian Tett: "[banks] have promised to provide credit lines to other institutions with subrprime exposure, such as mortgage lenders or special investment vehicles." SIVs may be the reason why money markets are not functioning properly. [2] Quant funds.