When I think about global markets, my goal is to try and imagine all investment opportunities around the world as large buckets.
Money flows around the world moving from one bucket to the next, and as they fill up, their prices rise.
The goal as an investor is to own the bucket that you think money will flow into next. On the other side, if you think money is going to be leaving a bucket, you can short it, and make money when it drops in value.
As an investor you also want to pay attention to where money is flowing now, in real time.
The following chart shows the dollar inflows into every major investment class around the world in 2010. (Click on chart to enlarge)
People are not taking their money out of money markets and investing it in stocks or bonds. They are taking the money out and spending it. They are using the money to survive.
As the economy continues to deteriorate the government will continue to borrow money and bring more water into the markets. The question you have to ask yourself is, which bucket will this water flow to?