Arthur at Jesse's American Cafe was on this before I was.
The US 5 Year Note with 100 bps CDS price has a 1.92% Yield.
That represents a strong divergence in opinion about what risk is. The yield relative to the default estimate tells us something and when it is that high it can't be good. Manic Depressive Market estimates of risk/return aren't good in "flight to quality instruments".
I am curious to know if there are any studies on the yield to CDS price ratios. If I were a betting man, I would side with risk guys on this one.
Who was that guy who returned +19.8% Sharpe 1.0 L/S equity with 50% cash in 2008?