Tuesday, December 22, 2009

Bloomberg Financial Conditions Index Reaches Positive Territory for First Time Since Aug. 2007

When it comes to the financial crisis of 2007-2009, the month of October 2008 was "Ground Zero," by several measures:

1) The Chicago Board Options Exchange Volatility Index (VIX), a popular measure of the implied volatility of S&P 500 index options, soared to a record high of 80.06 on October 27, 2008 from less than 20 just 2 months earlier (the VIX is now below 20).

2) The TED Spread, a popular gauge of credit risk (measured by the difference between the 3-month LIBOR rate and the 3-month risk-free Treasury bill rate), soared to an all-time record high of 456.485 basis points on October 13, 2008 (it's now less than 18 basis points).

3. The Bloomberg U.S. Financial Conditions Index dropped to an unprecedented, historical low of -11.5 on October 10, 2008, falling by nine full points in just 30 days (see chart above).

All three of these financial market indicators have returned to their pre-crisis levels, and the U.S. Bloomberg U.S. Financial Conditions reached an important benchmark level today - it closed above zero for the first time since August 8, 2007, more than 28 months ago. Add this important event today for the Bloomberg Index to the growing list of economic and financial indicators suggesting that the recession is over, the economic recovery is real, and the financial markets have now returned to their pre-crisis levels.

4 Comments:

At 12/22/2009 10:09 PM, Blogger Jeff said...

When would be the worst time to have a general election? I would guess "when people are panicking".

 
At 12/23/2009 11:02 AM, Anonymous Anonymous said...

I love watching the TED spread and VIX. Here are 2 great interactive charts to study these:


http://www.crystalbull.com/stock-market-timing/TED-Spread-chart

and

http://www.crystalbull.com/stock-market-timing/VIX-chart

 
At 12/23/2009 11:47 AM, Anonymous Benny "Tell It LIke It Is Man" Cole said...

Die recession, die, die, die.
Worth pondering is a big Wall Street rally in another six months. People are still sullen, including small shop owners, cabinet makers, many others.
We can hope mood improves as job market improves and sales go up.
Small jewelers in downtown L.A.'s diamond district report sales off by 90 percent. High gold prices have snuffed out demand.
Perhaps the stimulus package should have been larger. I would have preferred tax breaks, including temporary lifting of Social Security taxes on first $20k of wages. Oh well.
They say the main slug of stimulus spending should hit next year. Let us hope.
If all goes well, I think a sustained Wall Street rally possible from 2010 through 2012. DJ may break all-time high set back in Clinton era.
2000-2010 was the worst decade for investors ever, says the WSJ. That means it is a great time to invest.

 
At 12/23/2009 11:55 AM, Anonymous gettingrational said...

Recently there has been a lot of short selling of the VIX. This means there is a fear there is no fear of market volitility!

In other words a lot of traders are confident in the S&P 500 the next two months. Let's hope that they are correct.

 

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