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Wednesday, July 22, 2009

Nobody's Worried About Anything Anymore

FN: A dangerous level of complacency has set in. Nobody is worried about anything anymore. The near death experience of CIT didn't rattle markets. The solution, a private extension of another $3 billion in debt, merely kicks the can down the road. The whole budget impasse with California didn't even cause a twitch in muni markets. The 8th largest economy in the world starts handing out IOUs and nobody flinches? Come on! Yesterday Bernanke explained that his "exit strategy" consisted of doing the "opposite". Duh! But in reality it doesn't work that way. When Bernanke finaly decides to sell off the junk he accumulated to build a massive balance sheet, the market will front run him... spiking real interest rates and putting a break on any economic recovery then.

Anyways... problems for later. Right now, today, volatility (VIX) has scraped along the bottom of the MA Enevelope for too long now. VIX should snap higher from here and put equities, which are just as overstretched on the upside, under pressure.

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