It's time for the Fed "one trillion" hats- as of 2:00 pm Eastern, the Fed's Treasury holdings have surpassed $1 trillion. Add to this the well over $1 trillion in MBS and agency debt held by the Fed, and there is your perfectly quantified reason why the S&P has just hit a two year high, and why the Nasdaq bubble is alive, back, and will soon retest its 2000 highs. Basically, with the Fed the de facto purchaser of all securities with a yield of under 4%, the entire definition of a risk-free rate per the MPT has to be scrubbed. To be sure, risk-free will very quickly become risk-full when and if the Fed, in its attempts to succeed with central planning where so many have failed before, either finally loses control over rates, or far less probably, decides to remove some of these extra trillions in free liquidity. Until then, the banker party is on in full force. The reason for the penetration of this key psychological barrier was the completion of today's second POMO operation, which added $1.619 billion in TIPS securities. By the end of this month, the difference between the Fed and the second largest holder of US debt will have surpassed $100 billion... and continue climbing at a rate of about $30 billion per week. And it will not stop.