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:
- The gap between the S&P earnings yield, which is 6.8%, and the 10-year U.S. Treasury bond, which is 4.45%, will close over time. If it were to close simply by lowering the S&P earnings yield to the level of the 10-year U.S. Treasury bond, the market would rise 47%.
He also made a few other interesting comments:
- He advised to "forget everything you know about" P/E ratios, as the figure is meaningless without factoring in the cost of borrowing.
- He was "wildly optimistic" about '07, for reasons including the upcoming third-year presidential term to the prevalence of stock buybacks worldwide.
You can find more of Fisher's comments on
Forbes Digital Rules.
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