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This Bull Market Is Powered by Your Indifference

It’s the second-longest bull market in history. Stocks are expensive. This is the top.

At least, that is what I keep hearing -- from asset managers, traders and, of course, the news media. I’m not hearing much from the public, which seems to have lost interest in the entire stock-picking/trading/market-timing/macro-event thing, and are focusing instead on making regular contributions to mutual fund indexes via Vanguard and Blackrock.

I want to push back against three ideas:

Length: Those who claim this is the second-longest bull market in history (conveniently) use March 9, 2009, as the starting point. This is incorrect, something I will detail in a future column. The short version is that the bull market really began in 2013, when the major indexes breached the earlier highs set in 2000 and 2007. By that measure, this bull market is only three years old and could easily have a long way to go.

Expensive: It's easy to draw the conclusion that stocks are pricey. Relative to earnings, they are certainly above their long-term medians. But to reach that conclusion, you must ignore two other important and related factors: Inflation and bond yields, both of which are at or near record lows.

As I have pointed out before (see this and this), you can choose from a variety of measures...