Think about this for a moment.

The S&P 500 (SNPINDEX:^GSPC) is a collection of some of the best businesses in the world, including Apple (NASDAQ:AAPL), ExxonMobil (NYSE:XOM), and General Electric (NYSE:GE). It currently trades at about 13 times next year's earnings, and those earnings will likely grow by at least the rate of inflation going forward.

A 10-year Treasury bond currently yields 1.75%, or the equivalent of more than 50 times interest. And that interest is fixed, meaning it will lose value to inflation going forward.

Still, for years investors have been plowing into bonds and shying away from stocks. You know this isn't going to end well. What's unknown is when the tide will turn.

Two weeks ago, I asked Joseph Dear, chief investment officer of CalPERS, the nation's largest retirement fund with nearly a quarter trillion dollars under mangement, what he made of the growing investor inflows into bonds. Here's what he had to say (transcript follows):

Morgan Housel: Given the return characteristics of bonds today, do you worry about when you see huge inflows into bond funds?

Joseph Dear: Well, that is the question, right? What I ask people is tell me when this inflation's going to come, because I don't think it's today or tomorrow. Don't fight the Fed, they say. The Fed says rates are low through 2014. Maybe they were going to say into 2015, and so I wouldn't bet against that in that time frame.

But when you see the herd going one way, you've got to ask what do they see? And obviously the money's flowing into fixed income and it's coming out of equities. When you think about high inflation, is fixed income going to protect you better than a high-quality equity portfolio? Nope. So equities are probably a pretty good deal now.