Thursday, September 18, 2008
Here's another look at just how bad things are. This chart is a ratio of the VIX index to the 10-year Treasury bond yield. When things are really bad, the VIX is high and the bond yield is low. People are scared to own stocks, and instead prefer the safety of Treasuries. When you add to this the fact that consumer price inflation is 5% and Treasury bond yields are only 3.4% (giving you a negative real yield), you see that people are so frightened that they are willing to lose money (in real terms) in order to seek safety. The other thing you see in this chart is that these periods of fear are fleeting. Let's hope that's the case this time also.
Posted by Scott Grannis at 10:36 AM