For recovery of the financial markets, there are events that would lead the credit spreads e.g. willingness of Banks to repay TARP. They do have to be used carefully. While Goldman pretends eagerness for financial freedom, it is only asking to repay what it doesn't like. See article in barrons on TLGP for more details.
Ajay ji,Great blog.I disagree with your connection of a low vix to high capital flows.Low vix points to increasing risk appetite, which may, or may not result in capital flows to emerging countries. With the election year uncertainty, it would not surprise me if capital flows to India stay subdued for the remainder of the year. Capital flows should be correlated with the growth prospects of the domestic firms.Secondly, a low Vix might forecast lower volatility 30 days out(implied volatility basically predicts 30 day historical volatility), but it does not offer any clues for the remainder of the year in terms of direction or volatility. Indeedvix looks overextended on the downside and could bounce up on a short term basis (mean reversion). (I say this based on the divergence from it's 20 day or 10 day moving average).Lastly, I don't think any firm carries out capital budgeting /forecasting decisions based on a low value of Vix!Just my 2 cents!
Tim Geithner's op ed in NYT shows that he has called Goldman Sach's bluff. Some banks will be able to begin returning capital to the government, provided they demonstrate that they can finance themselves without F.D.I.C. guarantees
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