U.S. stock mutual funds gain $7.5 bln, most since 2001 -Lipper

The situation of the stock market compared to fixed income reminds me of a story:  Sam, an irascible fellow who was not much like by his neighbors, died and everyone showed up for the funeral either for the refreshments or to make sure he was dead.  At the appropriate moment in the service, the clergyman asked if anyone would say a few words of remembrance about Sam.  There was a long and awkward silence, so the clergyman said, "surely, there must be someone who has something to say about Sam?"  Finally, a longtime acquaintance stood up and said, "I'll say this for old Sam: his brother Henry was even worse."

Stock inflows were substantial in the week ending January 9th, according to Lipper .  With real interest rates already negative all over the world and high-quality stocks like Intel yielding 4.2%, the case for equities is so compelling as to be almost indisputable.  All that is needed for a big stock market rally is a dose of animal spirits.

From whence will these spirits come?  Perhaps it will come from Japan, where Mr. Abe seems intent on abolishing the last vestiges of central bank independence, consistent with what governments around the world are doing.  Japan lightening the spark of speculation would be highly emblematic to the rest of the world.

It is telling that central bank independence, long considered an important social good, is now being denounced as  unconscionable and even immoral by the likes of the formerly sane Joseph Stiglitz.  In demanding a weak currency and high inflation, Mr. Abe may be unleashing forces he can hardly comprehend, let along control, but they will likely lead to the aggressive deployment of capital that Keynes referred to as "animal spirits."

Here are the numbers for the week ending January 9th: