Through The Fly's Eyes: A Bull
Ken Fisher, Of Forbes Columnist Fame, Is A Big Bull
The discount between the yield on stocks versus the yield on bonds will have to converge, meaning stocks will head higher, said Ken Fisher while speaking on a Forbes sponsored cruise:
* Forget everything you know about P/E ratios. It is a meaningless figure unless you also know the cost of borrowing.
* Invert P/E to E/P and you get "earnings yield" - a public company's after-tax cost of raising capital.
* The S&P earnings yield is 6.8%. The 10-year U.S. Treasury bond is 4.45%. The gap will close. It always closes over time. If the gap closed simply by lowering the S&P earnings yield to match the 10-year U.S. Treasury bond, the market would go up 47%.
You can find more of Fisher's comments on Forbes Digital Rules.