Both Bond and Equity markets roared to life in August. The Dow posted its biggest gain since February (+3.2%) while the 10-year Treasury had its best month since January, pushing its yield to a 14-month low Thursday. Equity investors root for a recovering US as the S&P 500 hits an all time high even as bond investors retrench from a deflationary Europe and crisis in Ukraine. Bonds and stocks cannot both rally indefinitely; one must fall. The smart money always flows to fixed income, just like in 2007.