Finally, there is the issue of interest rates and our addiction to their low levels. Tapering appears around the corner, and we shall see if the equity market will be tolerant or if rising interest rates act as a headwind to growth and the expected rebound in second-half growth fails to materialize.

While second-half 2013 S&P 500 earnings have exceeded expectations (with year-over-year growth of close to +5%), much of that improvement has been confined to the financial sector, where share buybacks and reserve reversals have buoyed results.

Importantly, if we exclude financials (which benefited from buybacks and lower loan-loss provisions or reserve releases) from overall results, both first- and second-quarter earnings growth are barely expanding and are likely to be flat to down.

In other words, the quality of earnings growth and the absolute rate of growth in profits (excluding financials) thus far in 2013 have been poor.

Rather than take down valuations reflecting this poor earnings quality, the weak absolute level of nonfinancial earnings and tepid sales growth, to my surprise, market participants have elevated valuations.

In fact, the year-over-year change in the S&P 500's P/E multiple has been roughly 4.2x the average year-over-year increase in the last 35 years.

I now believe that 2013 S&P profits will total about $107 a share and 2014 S&P profits will fall in the range of $109-$110 a share. These estimates, though slightly higher than I expected when the year began, are about $1-$2 below 2013 consensus projections and $5-$6 below 2014 consensus projections.

The previously mentioned domestic economic growth dynamic calls into question whether the U.S. is in a self-sustaining recovery or whether our economy is still, four years after the end of the recession, dependent upon continued and unprecedented easing in monetary policy and the maintenance of zero interest rates.

Based on the dialogue over the last two months, it is clear that both the Fed and other central banks are fearful of spooking the markets. Nevertheless, it is also clear that global bond rates have likely completed a three-decade decline.

Given these conditions mentioned in the body of today's opening missive, it is increasingly clear that the benefits of quantitative easing have been diminished with each round.

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