Wednesday, November 12, 2008
The stock market is flirting with the lows it hit in October. I'm hopeful we don't see new lows, and I base that optimism on the following observations. Key measures of fear are all lower now than they were then: the Vix index is 65 now vs. 90; the TED spread is 197 vs 460; 2-year swap spreads are 102 vs. 155; 10-year swap spreads are 40 vs. 63; and junk bond yields are 20% vs. 22%. Other indicators are showing significant improvement in the economic fundamentals: the dollar is up 7%; bank reserves are up 66%; raw industrial commodity prices are down 12%; oil prices are down 25%; and real estate prices are lower and sales volume is up. In short, while the stock market is still plenty fearful, the inner workings of both the market and the economy show that stress and fear have subsided to an important degree.
Posted by Scott Grannis at 8:22 AM