Four and a half years and still going strong. The bull market that began in late 2002 is far from over. Pessimists will tell you that the good times have to stop, that after four years the market just has to be due for a correction. But that's because the pessimists don't look at what is driving this market.
The driver is the relationship between earnings yield (the inverse of a price/earnings ratio) and bond yields. When earnings yields are bigger than bond yields, institutional investors can make a profit by using borrowed money to acquire shares of stock. The process can continue for years, until equity prices are bid higher or the cost of money gets higher.
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The driver is the relationship between earnings yield (the inverse of a price/earnings ratio) and bond yields. When earnings yields are bigger than bond yields, institutional investors can make a profit by using borrowed money to acquire shares of stock. The process can continue for years, until equity prices are bid higher or the cost of money gets higher.
Read the complete column
