Relief rally

Stocks are up 8% from yesterday's lows, 2-yr Treasury yields are up 75 bps, and credit spreads are down sharply. So far the government hasn't done anything except to curb short-selling and announce a plan to socialize the remaining costs of the housing crisis sometime in the future. That tells me that this crisis wasn't fundamental or systemic. There was a relatively easy fix out there, and what it did was to remove the fear of an imminent financial market implosion. We've still got to wait awhile to see the details of the plan, and we've got to wait to see if the economy is getting better or worse. So there will be plenty of time for reversals and surprises. The VIX index is still above 30, so the storm hasn't completely passed. But I think that with time we'll see the economy doing slowly better, and by the time the RTC solution gets put together, it might not even be necessary.