Yes, the global reach of the US based multi-nationals explains some of the gains in the large cap stock indexes (especially the DJI), but that wouldn't explain why small cap stocks have risen also. The stock market reflects the second derivative of the economy, where the first derivative is whether the economy is going up or down, and the second derivative is the rate at which the first one is changing. So when people believe that the economy has hit bottom and the rate of decline has stopped being negative, it's good news, and time to invest. But I think that can only go so far, and certainly wouldn't account for 50+% gains since hitting bottom in March.

Back in March, a euro was worth about $1.27. Last week, it reached $1.50. If you are an investor in Europe, and a U.S. stock stayed constant in dollars, it would be ~20% cheaper in euros. Combine that with near zero interest rates, and you will see money pouring into the US to buy undervalued (in native currencies) stocks. Buy dollars at a lower price, borrow against them, and then invest - that will drive stock prices up. In addition, as credit eased up this year with the Federal Reserve pouring hundreds of billions (or is it now trillions?) of $$ into the money supply, buying up debt, that money has to go somewhere. People are still spooked about real estate (not to mention there is a huge oversupply in many markets), they're hesitant to get into buying debt instruments (who would trust the ratings agencies now, after their performance over the last five years?), so that leaves equities and commodities. But don't worry, it's not going to last, the markets over-reacted to the debt crisis and went too low, now they have rebounded too high.

Gross is right, though, about the diminishing correlation between the stock market and the general economy in the US. One other poster compared the stock market to gambling, and that is a pretty reasonable comparison, as most people are just speculating. When assets are traded for reasons other than their underlying or potential profits, the connection between company's performance and it's market value is bound to weaken.

www.onthetimes.com