Tuesday, June 15, 2010

As fear subsides, prices rise

As time passes and the Euro debt crisis fails to paralyze the global banking system (the Greece debt crisis first erupted last January), the world gradually recovers its confidence. Measures of fear, uncertainty and doubt, such as the Vix Index and swap spreads, are declining, at the same time that prices of risky assets, such as equities and speculative commodities (e.g., gold, oil, copper) are rising on the margin. As the demand for a safe haven declines, the dollar has dropped about 3% from its recent highs. This is all very logical and unsurprising, and should continue until the next "crisis" or "wall of worry" appears on the horizon, though I have no idea what or when that might be.

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