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Which Market is Right?

I find it rather entertaining when different markets are relaying very different messages.  The 10 year treasury yield ended 2013 with a yield of about 3%.  Today it is at 2.58%.  The Russell 2000 Growth ETF (IWO) is down 11.19% from its early March peak:

Russell and 10Y vs SPY

Is the S&P 500 right while the Russell and 10 Year are wrong?

Do you notice which market is oblivious?  Maybe the S&P 500 (SPY) playing near its all time highs?  Another troubling but related matter: is Vol forever gone?  The VIX has been flirting with the lows of all time:

VIX is Sleeping

VIX has been sleeping for months

The problem is that you start to get that uneasy feeling.  Credit spreads grind tighter while new issue deals are oversubscribed.  Equity volatility remains subdued and the S&P 500 refuses to have any sort of price correction.  You just start wondering if a lack of volatility really forecasts a bright future.  Is the volatility low because everything is fine or is volatility low because “buy on any dip” and leverage up while the money is cheap are the current investment mantras?  Does the latter forecast a massive unwind while everyone runs for the door?

Speaking of leverage, Margin Debt might have something to do with that.  Notice where the peaks occurred?

Margin Debt

Did that balance just peak? What does that mean?


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