that most people have never heard of (make sure it is set to 3Y, for maximum effect)
I typically mention the stock market in my updates, but it's also important to look at the credit markets. As you may remember, banks lend to each other at rates closely related to the Fed Funds rate but, in reality, based on the whatever given banks will charge each other. The TED Spread (see scary chart link above) is the difference between the rates that banks charge each other for loans (as calculated by the LIBOR -- London Interbank Offered Rate -- the best measure of short term interest rates on bank-to-bank loans) and the yield of 3-month US Treasury bills (the best measure of short term bond rates -- bank to government loans, that is). Since banks are in the business of giving out money and getting more money back in return, they are always looking for the best place to put their money. Putting consumer and business transactions aside, is it better for banks to lend their excess money to other banks or to lend it to the US government by buying bonds? The safer it is to lend to other banks, the lower the LIBOR rate. When more risky, the rate goes higher. Conversely, when it is safe to lend to other banks, bond sales decrease, causing their yield ("interest rate") to increase. When it is unafe, everyone buys bonds and their yields approach zero in the short term. Therefore, the higher the TED Spread, the scarier the current climate. Right now, it's above 3. The historical average over the past fifty years is less than 0.5. This is what a credit crisis looks like...
