The financial system is still awash with an excess of liquidity

Here's an interesting article from Bloomberg by Mark Gilbert entitled "Fast, Loose Credit Scares Even the Buyout Gurus" which illustrates the fact there is still an incredible amount of cash floating around seeking "yield." Even the huge volume of subprime mortgage debt has not been a match for the liquidity that abounds.

One source of liquidity that will continue to expand for some time to come are the large pension funds, and their returns continue to compound even as money continues to flow into the funds. At some point that trend may reverse, but not anytime soon.

-- Jack Krupansky