Dislocations

Two weeks left in the trading year and Wall Street is pulling out all stops.  Equity Hedge funds now underperforming by 50% relative to the overall market.  Today, the ISEE call/put ratio hit 208.  This is the most exuberant reading since the September top of this year (205).  The other recent peak came in late July 2011 right before the post debt ceiling crash that launched Occupy Wall Street.

Meanwhile, under the radar, the RomneyBot asset class, Municipal Bonds (above), are now tanking. The ultra wealthy love Muni Bonds because they don't have to pay any Federal tax on the interest.  Municipal Bonds have given up over a year's worth of yield in two weeks.  From a capital gain standpoint, it's a three month loss.  This is fully what we should expect as one asset class after another leaves the party...

Below is six years' worth of data on the ISEE. The ISEE call/put is the inverse of the CBOE put/call, so high values are indicative of excessive bullishness. It's supposed to be a better gauge of speculator sentiment.   You can see it rarely gets above 200.  Today's 208 value is not yet represented in the graph to the far right where it will appear tomorrow.  The spike to ~200 at the far right is from the September 14th high in the market: