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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 414.48+0.7%Jan 9 4:00 PM EST

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To: elmatador who started this subject9/22/2001 9:33:50 PM
From: Just_Observing  Read Replies (3) of 219180
 
Barron's: Market undervalued by 17%
'Fed Model' compares earning estimate to bond yield
By CBS.MarketWatch.com
Last Update: 1:09 PM ET Sept. 22, 2001

SAN FRANCISCO (CBS.MW) -- The huge slide in stocks last week created an oversold condition that leaves the average S&P 500 stock 17 percent undervalued, according to the cover story in this week's Barron's.

The article cites a "Fed Model" for assessing stock valuation. Using the interest rate of a 10-year Treasury bond, the model combines the expected earnings for the S&P 500 stocks divided by the index, which closed Friday at 965.80.

By Barron's calculations using IBES estimates, the collective earnings per share in the S&P 500 over the next year will be $55. Dividing by the S&P 500 level provides a 5.69 percent yield that tops the 10-year T-bond's 4.69 percent


Of course, many people use Barron's as a contrary indicator with considerable success.

marketwatch.com
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