Last week, Tim Melvin asked how anyone can be a bull, and didn't want to hear about technicals or "oil for the lamps of China" answers. Here is a two-step plan for feeling more bullish:

1. Don't anchor on the March low -- float with risk premiums. The proximate cause of last week's breakout was Fed chief Ben Bernanke's public assertion that he has an exit strategy and still has room to be "accommodative ... for an extended period." Bernanke is telling us that he intends to keep the punch bowl out and drive down the price of risk. This makes stocks relatively attractive as an asset class, because low risk premiums make for high P/Es.

The most credible bear out there (beside our more nuanced Doug Kass) is David Rosenberg, but I was disappointed last week when he offered a version of the "quite a run" thesis as his bearish argument. He pointed out that a 15% surge in the S&P 500 typically implies large GDP growth in the following quarters. He argued that, based on the history of big index moves, the market is now pricing in 5.5% GDP growth. We aren't going to get that kind of growth, so therefore, the market is overextended.

But Mr. Rosenberg didn't seem to account for the sharp drop in prices (increase in risk premiums) that preceded the rally, or the reduction in risk premiums that has accompanied the rally. The change in the price of risk is more important to stock prices than how far we have moved from some arbitrary low.

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