An Irrational Fancy: A Tale of Two Charts

<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiuV4fiVApiY_lQNrt8rfsZSOnqf5FXqfQBL2-6BDIIew67VE576Gwpbjmawwrv1w7Qir8azM0GC8ZoqK2Z01ippPrpy_l6CsD8McqfX_NE-O5ZMquartsEJJm6EQaaAk-4vjWW3WbWSb0/s1600/An+Irrational+Fancy.jpg" imageanchor="1"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiuV4fiVApiY_lQNrt8rfsZSOnqf5FXqfQBL2-6BDIIew67VE576Gwpbjmawwrv1w7Qir8azM0GC8ZoqK2Z01ippPrpy_l6CsD8McqfX_NE-O5ZMquartsEJJm6EQaaAk-4vjWW3WbWSb0/s320/An+Irrational+Fancy.jpg" /></a><br /><span style="font-size: x-small;">Click to enlarge.</span><br /><br />In blue (left scale), we have the 5-year treasury yield minus the 5-year CD rate. I claim that the current spread is as irrational now as it was in 2007. This can be forgiven perhaps since the typical investor is never told to buy a 5-year treasury directly from the government. Wall Street cannot earn a penny on purchases made outside of their control.<br /><br />In red (right scale), we have the S&P 500 index adjusted for inflation. I claim that the current inflation adjusted index is as irrational now as it was in 2000 and 2007. This can be forgiven perhaps since the typical investor is never told to buy a 5-year treasury directly from the government. Wall Street cannot earn a penny on purchases made outside of their control.<br /><br /><i style="color: red;">It is by no means an irrational fancy that, in a future existence, we shall look upon what we think our present existence, as a dream.</i><span style="color: red;"> </span>- <a href="http://www.brainyquote.com/quotes/quotes/e/edgarallan110047.html">Edgar Allan Poe</a><br /><br />This is not investment advice. Just opinions!<br /><br /><b>Source Data:</b><br /><a href="http://research.stlouisfed.org/fred2/graph/?g=ql9">St. Louis Fed: Custom Chart</a>

An Irrational Fancy: A Tale of Two Charts

Click to enlarge. In blue (left scale), we have the 5-year treasury yield minus the 5-year CD rate. I claim that the current spread is as ir...

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