Equities aren't the only markets acting strangely these days. The bond markets are acting even stranger.

For both bond and equity markets the cause of this strange behavior is the same: Piecemeal government actions in the U.S., Europe and Asia culminating in massive intervention.

The U.S. government is trying to nurse the economy back to health. And like a doctor who has a pill for anything that ails you, the U.S. government is trying to find a cure for practically every ailment afflicting the economy.

Sometimes when you're on a lot of medication, you don't know if it's the symptoms or side-effects which are causing the most pain.

One thing is sure, the government has flung open the doors of its heavily stocked pharmacy and has emptied its shelves on the poor economy.

And when the meds don't work, they simply put the targeted patients on life support – as they did with Freddie, Fannie and AIG.

Well ... except for that one patient that got away ... Lehman Brothers. At the time the government more or less said, “We can't save them all.”

Now the government is more or less saying, “let's save them all.”

No wonder the markets are confused. These government prescriptions are having all kinds of confusing side-effects...

Like when the government decided to lend to banks in return for asset-backed commercial paper. Investors were soon favoring the higher-yielding asset-backed debt of these banks over corporate and European bank debt which did not enjoy such government backing.

It's no coincidence that the European bank crisis began to accelerate about this time.

And when the FDIC guaranteed bank deposits of up to $250,000, money-market funds cut back their investments in short-term commercial paper and held on to more money for themselves. Why? They feared that savers would begin leaving money-market accounts for safer (but lower-yielding) government-backed bank accounts

The government may have eased the concerns of bank customers, but for a time it helped make credit markets even tighter.

Every time the government gave the economy a remedy that worked in theory, more unforeseen symptoms appeared.

Now we have an economy reeling from both the original causes of the crisis – reckless lending by banks and interest rates that were way too low – and some very clumsy moves by the government.

You can tell from the markets' crazy swings that it doesn't know what to make of all this.

And, sure you can argue that it's created some bargains in the stock market – a lot of companies are going at half price.