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The Barron’s interview over the weekend with Kevin Duffy and Bill Laggner makes for some interesting reading. They are firmly in the bear camp, whose ranks have thinned out quite dramatically over the past couple of months:

The immediate risk is the economy. We’ve had a nine-month rally. We think it’s a false rally… In real terms, can we get cut in half from here? We think so. S&P earnings are distorted because of accounting changes for banks and brokers; if banks were marked to market, S&P earnings next year could fall to $45 a share. Bullish sentiment is rivaling the 2007 top, and volatility has fallen dramatically. We like the VXX, an exchange-traded note that’s based on S&P 500 short-term volatility as measured by the VIX index. It’s down 67% this year, and fits into the whole idea that complacency is very high.

Is there value in the volatility index right now? The last time the VIX was this low was the summer of 2008 just before the financial crisis really kicked into high gear. It’s also currently below its average level of the past decade. Have our problems really been fixed? Are things really back to normal? The VIX seems to think so.

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