One of the reasons why I'm not uber-bearish is because of all the cash being used by corporations to buy back stock. Standard & Poor's released their update of total market yield (.pdf) - dividends plus buybacks - and relative to bonds, the market looks pretty good:
As you can see, the total market yield is above the yields for 2-year and 10-year treasuries.
The weakness of this argument, though, is that buybacks are ephemeral. With corporate profit margins at or near all-time highs, if cash flows begin to fall, so too will buybacks. I do not expect margins to remain as high as they are, though I don't expect margins to collapse either. Instead, I expect margins will slowly erode over the next few years as operating and interest expenses begin to rise.
It could also mean, of course, that bonds are over-valued.
The other fact is that at some point, this model breaks down. For example, when Japanese government bonds were yielding 0%, does that mean the proper earnings multiple on the Japanese market was infinity? No, of course not. When 10-year T-bonds dropped to 3.1%, was the proper market multiple 32x? Again, no. At some point, the relationship no longer works. I don't know where that level is, but I also will not slavishly follow this valuation parameter either.