Apparently, once again there are grounds for hope for a “more lasting accommodation” in the Mideast, judging by the latest kabuki signals between Pres. Ahmonajihad and Uncle Sam.
And, oh, right: Don Kohn said that we needed some more of that pragmatic flexibility on interest rates.
And there was much rejoicing.
My hobbyhorse du jour, the difference between the 3-month London interbank offer rate and 3-month Treasurys, stands at 212 basis points. The last time confidence was this low was… Black Monday, 1987.
Another way to look at it would be to examine the T-bill/Fed funds ratio 2.96/4.60 ~= .64. Except for August 20, 2007 (when the 3-month tbill divided by the effective fed funds rate was 3.06/5.03 ~= .62), this is the lowest the ratio has gone since the bona fide 26-sigma event of 9/11/2001, and its echo defaults–Enron and Worldcom. It is equal to the LTCM rate, and you’d have to go back to 1982 to find a comparable level of panic.
Somebody with much better information than me is calling BS on this rally.
