Stocks vs Bonds

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.

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