The risk-on sentiment evident in the markets as the "January effect" continued over the past couple of weeks while this letter took a short break.

The Euro gained against the U.S. dollar as the U.S. Federal Reserve signaled that it would keep interest rates low for an extended period through the end of 2014.

Euro-zone fears seemed to subside as the European Central Bank (ECB) instituted the LTRO (long-term refinancing operation).

The ECB's LTRO essentially backstops funding for banks and financial institutions (but not for sovereigns).

The ECB is likely to institute loose monetary policy (i.e. printing money) if ECB President Mario Draghi wins his argument against the German school of hawkish monetary policy.

With investors who had been on the sidelines wading back into the markets, bond issuance from Emerging Markets issuers picked up steam.

Credit spreads for bonds have been tightening steadily on a mismatch between supply and demand.

Overall bond supply for the month of January was muted relative to years past; European issuance has been relatively slow and the funding picture for domestic U.S. issuers is much better than past years (i.e. the need to re-finance is less).

Demand for bonds and risk in general is robust on the other hand as there is an investor "fear of missing the rally."

Friday's U.S. payroll and unemployment figures came out at a 3-year low, pointing to a gradual bottoming out in the U.S. macroeconomic picture.

Yet while all this is happening demand for U.S. Treasury bonds remains stubbornly strong.

The yield on the benchmark 10 year Treasury bond is still around 1.9%.

What gives?

Are equities leading bonds?

The market is accustomed to the bond markets serving as a leading indicator of the health of the overall economy with flight-to-quality demand for U.S. Treasury bonds typically strong on expectations of slowing macroeconomic growth.

At Davos, there was a lot of chatter about preferential treatment for U.S. government bonds under the Dodd-Frank rules.

Deposit taking banks are allowed to hold U.S. Treasuries without being designated as holding proprietary positions while European government bond holdings are not exempt from rules against proprietary trading.

While part of the demand for U.S. government debt is structural, a good chunk of it is driven by a fear of the unknown.

The Syria-oil-Iran triangle factors in heavily.

Events in Syria are likely to come to a head by the end of this Summer (if not sooner) after which the focus will switch to Iran (and oil).

The demand for gold, while not fundamental based, is also partly driven by the fear factor.

While traveling in Istanbul's Laleli commercial district, this player came across clusters of Russian traders buying goods to import back home; they were clutching wads of U.S. dollar bills to use in their transactions.

That is telling.

The New York Giants American football team won the Superbowl contest; at the onset the gambling odds were more than 80:1 against the Giants winning.

Facebook's upcoming and much touted IPO (initial public offering) is a story with similar odds.

Compared to Google (a proven money-making machine), Facebook has yet to establish a proven business model; while Facebook commands access to a wealth of user information, monetizing that user information is the key.

That Facebook will succeed in that endeavor is a gamble that seasoned investors will likely shy away from; Facebook already had a de facto internal IPO that captured much of the upside already.

The potential upside from here is more limited.