Waiting for the big Kahuna Message Board

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Strategies & Market Trends : Waiting for the big Kahuna

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To: William H Huebl who wrote (49929)	1/8/2001 9:41:15 PM
From: Moominoid	Read Replies (1) of 94695

Thanks The SCY ratio (SCYR) compares the yield (Y) of being in stocks (S) with being in cash (C). I use the sum of the dividends and earnings on the S&P500 against the 13 week coupon interest rate on Treasuries. You add dividends to earnings? This seems the same as Yardeni's original valuation model. My problem with these is they ignore future earnings growth which is the one of the major point of earning stocks rather than bonds Of course if the long-run earnings growth rate is equal to the risk premium for earning stocks the two cancel out. But in periods when growth of profits is high stock yields will be lower and vice versa. Yardeni now adds 0.1 times the future earnings growth rate but that doesn't make a lot of sense to me. Of course something might not make much theoretical sense but be really useful in the real world :) Of course, actually future investment needs to be deducted from earnings to get the proper discounted cash flow. I have a spreadsheet set up which makes these not too difficult to do. I guess I could do one for the S and P 500 if I could get the aggregate assets, depreciation, etc. data. David

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