Investors had parked their cash in treasuries after the liquidation of commodities over the past few weeks, and those funds today are flowing powerfully out of treasuries (top chart) again and back into stocks (see chart below). After the Fed rescue of the financial markets last week, there is an improved sentiment that the worst may be past, and this is buoying stocks and money is flowing back. The money must go somewhere, and this looks like it may be the new bubble for the Fed. Stocks have always been the Fed's favorite asset form for money creation to inflate. It grabs the headlines, responds instantly to stimulus, is the darling of the news media, is widely held by investors of all types, and is effective at creating the impression of prosperity. I think I am finally ready to begin taking long positions in stock indexes again.
