My disdain for the efficient market hypothesis came about by observing the difference between the stock and bond markets. It was apparent that the Fixed Income traders were of a “rational” mindset so often lacking in the equity world.
Indeed, I have frequently called Bonds the market that acts as “Adult Supervision.”
So I got a kick out of Mike Santoli’s reminder this morning in Barron’s:
“It’s for good reason the stock market was dubbed “the bond market’s idiot kid brother.”
Mike also points out an interesting data point regarding the Industrial’s dividend yield:
“Telling a similar story in a different way, the dividend yield of the Dow Jones Industrial Average components, at 2.65%, is essentially equal to the 10-year Treasury yield. The folks at Morgan Stanley note that over the past 50 years the Dow’s yield has exceeded that of the 10-year Treasury for only one period—the end of 2008 into early 2009, as the financial crisis climaxed.”
Idiot kid brother indeed.