Replies to post #982 on Justa's Dive Bar

[chainik]

IAC, to keep it simple, let's stay away from CDOs, liquidity, and stick to credit spreads :)

CDSs (or ABFIX that Earnie was talking about) have been tightly correlated with VIX and inversely correlated with general market. During all four previous tradable declines (spring and fall 05, summer 06, Feb 07) ABFIX went up.

http://stockcharts.com/h-sc/ui?s=AFBIX&p=D&yr=3&mn=0&dy=0&id=p33229160363

The strange thing is that for the first time in two years there is a significant divergence from this pattern: AFBIX has been rising for two months TOGETHER with SPX. A bearish possibility (not sure that it makes sense) is that smart bond traders see trouble ahead and buy puts, while stupid AAPL and RIMM "investors" continue to party. Anyway, will be interesting to watch ABFIX chart.

BTW, not a lot of activity on SI gold sites. A good sign IMO.