Everything seems to be returning to normal. I expect this to continue until there is a reversal of the expectations cycle. Though asset prices are rising, I think most market participants are expecting a W, especially considering a recent survey in the Lex column showed most investors think the current equity market upswing is a bear market rally.
I thought I would share this interesting chart. The Libor-OIS spread is the premium banks charge each other for three-month interbank loans. A downward trend indicates a decrease in bank lending. As you can see, the index has almost returned to pre-subprime levels.
