equity vol at a five year low is telling us that no one expects a dramatic outcome at any level. They may be right but it's all just a bit too cute. That chart in isolation is pretty meaningless but in the context of where we've come from and with global GDP estimates going off the cliff and every other market measure at historic extremes I find it healthy to be skeptical. Creeping deflation is a headwind that scares policy makers to distraction and despite the printing machines smokin' they can't yet see it off. There is a tipping point at which deflation becomes a bad thing for shares and that is usually when inflation has fallen to 1.5%. TIPS implied inflation is currently at 1.86%. Moreover, everyone is following the same script; soft consolidation here and around the Thanksgiving holiday followed by a wild banshee ride into the year end with everyone quietly agreed, (market participants, policy makers, media), that no one wants to rock the boat this side of 2014. A deflation shock may not become apparent until the New Year and possibly deep into 2014 but it represents a massive risk to equity investments. 11/26/13
11/26/13