Morningstar, Inc. has reported that over $200 billion of new money has been added to bond mutual funds from January through August of 2009, while only roughly $15 billion has been invested in stock mutual funds.

As Yogi Berra said, “you can observe a lot just by watching” and at present there are a lot of things to be watching. The number of things that could go wrong in the U.S. and global economies over the next year or so, as we seek to find our way out of this financial crisis, can make your head spin.

Financial markets and the economy always feed off each other in a capitalist system and we tend to cycle toward extreme inflection points, overshooting on the upside and on the downside. Periods of apparent growth and profitability seem to mask quite a bit of excess and inappropriate behavior and that is where we find ourselves presently.

A friend of mine emailed me a video file a few weeks ago in which six students, three in white shirts and three in black shirts, pass two basketballs around. You are very specifically instructed to count the number of passes that occur in one minute between the students wearing white shirts as all six students continually interweave and toss the basketballs around each other.