"Fear of everything" driving financial markets

When large institutional investors are fearful, they move money into U.S. Treasuries, driving down the yield on those instruments.  This past week, the yield on the 10-year treasuries reached an all-time low:

Investors afraid the European Union might unravel, after Spanish bond yields spiked and talk of a Greek exit returned to the table, fled for the apparent safety of U.S. government debt... Valeri also acknowledged the weakening of the U.S. economy.  In what has been a mixed earnings season, several U.S. companies have indicated they are suffering from the global economic slowdown.

The international business editor at The Telegraph echoes these sentiments:

Europe is “sleepwalking towards disaster”, according to the 17 experts, who warned that over the past few weeks “the situation in the debtor countries has deteriorated dramatically... This dramatic situation is the result of a eurozone system which, as currently constructed, is thoroughly broken. The cause is a systemic failure."

In a veiled rebuke to hard-line politicians in Germany, the economists said the root cause of the crisis has been the boom-bust effect of rampant capital flows over the past decade – not delinquent behaviour by feckless nations... they said the current course had become hopeless. Deepening recession is “tearing at the social fabric of the deficit states”. The lack of any light at the end of the tunnel is leading to a populist backlash in both the debtor and creditor states.

And earlier this month, Nouriel Roubini spoke of a "perfect storm" coming in 2013:

Mr Roubini, the New York University professor dubbed "Dr Doom", said a number of unpleasant factors would combine to derail the global economy in 2013, including an escalation of the eurozone crisis.

Other factors included further tax increases and spending cuts in the US that may drive the world's largest economy into recession; a hard landing for China's economy; a further slowdown in emerging markets; and war with Iran. 

"Next year is the time when the can becomes too big to kick it down [the road]...then we have a global perfect storm," he told Reuters. 

Economic and market predictions are a dime a dozen, but I do credit Roubini's comments for getting me out of the equity markets before the crash of 1987, so I am paying some heed to his words.

Warren Buffett famously has said that he became rich by being fearful when others were greedy and greedy when others are fearful.  That sounds logical, but it's a challenging philosophy for the average person to follow in real life.