How long can bear-market rallies last?

The current run-up in equities might go on and on – perhaps even for several years, according to economist Russell Napier.

But he warns, in this excellent video interview with FT journalist John Authers, that an extended boom in equities doesn’t necessarily mean the economic fundamentals are sound.

For example,the stock market rally after the dot com bubble burst was fuelled by too-lax lending. Was this in effect a bear-market boom?

Now governments are pouring money into economies the world over to stimulate consumption.

This will lead in perhaps as long as 2-3 years time to a big inflation problem, the Chinese losing their appetite for US Treasuries, Treasury yields doubling and a cataclysmic bear market with the S&P falling to 400.

Until then, S&P could easily double from its March low, predicts Napier

Do you have the courage to stick your money in and wait?

It still feels counter-intuitive that the current run-up will last a few years given the scale of consumer and corporate debt.

But since when has logic had anything to do with anything?