Reading The Tea Leaves

Posted on 03/10/2009 at 3:36 pm by Bob Cesca

by Lee Stranahan

Everyone on TV always talks about the Dow and stock market but the DJIA isn’t really a great indicator of how the financial markets are doing. If you want to know how the financial sector is doing, one good indicator is the TED spread.

Paul Krugman has explained the TED Spread as….

the difference between the interest rate on three-month Treasury bills and three-month LIBOR, the rate banks charge on loans to each other. The TED spread is an indication of lack of trust in financial markets…

So - click this link to see the TED Spread chart for the last year.

Higher is worse; in other words, less confidence in the financial markets. See that HUGE freaking spike starting around September?.That’s what a picture of the Financial Crisis looks like. If you check the period since Barack Obama was elected or sworn in, it’s lower and fairly stable.

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  • Jeff

    Well I don’t understand most of this stuff but Krugman seems like he knows what he’s talking about(Nobel prize and all….) and he certainly isn’t in the habit of making excuses for Obama, so I trust that he’s onto something here.

  • SillyRatfacedGit

    When Paul Krugman talks, I listen.His batting average for the past 4 years tells me that he knows what he is talking about. He is Nate Silver scary.

  • http://travisoberlander.com Travis Oberlander

    Well well well. Look at that peak day 10.10.2008. Does that day ring any bells for anyone? That was the friday that ended the historic 18+% drop in the DJIA – the largest ever in a week. Coincidence? I think not.