Investors seeking to avoid the credit carnage have rushed to quality in a tidal wave unseen in a long, long time. A recent three-month T-bill sale was the largest amount offered since 1990. We were recently on a motorcycle trip through Montana, Idaho and Banff, Alberta. While we were in Canada, an Ontario institutional investor tried to place an order with one of the Big Five banks for Canada T-bills, and he was told that they weren't available. As this startled institutional investor pointed out, "I've been in this business for 28 years, and I've never heard of anything like that before."

Seasoned veteran fund manager Martin J. Whitman (Third Avenue Value) writes, "The vast majority of great financial fortunes built in this country, especially by Wall Streeters and corporate executives, were not built by people who took investment risks. Rather, the secret to building a great fortune is to avoid, as completely as possible, the taking of any investment risk."

Along with U.S. and international Treasuries, where have the safe harbors been, and what is the smart play looking ahead? Vanguard's head of active quantitative strategies Joel Dickson noted in The Wall Street Journal, "Mutual funds were insulated because, unlike hedge funds, they typically avoid being short or leveraged. Both moves, which are popular with hedge funds, can magnify the effect of bets."