The coming US dollar crisis Message Board

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Strategies & Market Trends : The coming US dollar crisis

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To: stockycd who wrote (3527)	1/22/2008 6:35:42 PM
From: Real Man	Read Replies (3) of 71454

TYX has me scratching my head. The standard stock/bond allocation (Fed) model shows stocks are considerably cheaper than treasuries now, unlike in 2000 or in 1987. That alone says a bear market of the size we've seen in 2000 is not very likely - at least, not while the 30-year yields are so low, and not while this model holds. This model has shown a lot more extreme undervaluation before. That was during the Great Depression. However, in recent history TYX and SPX earnings yield have been closely related. It showed 36% overvaluation in 1987 prior to the crash, and some 65% overvaluation in 2000. Now we have at least 20% undervaluation. TYX is also not a very good investment vehicle - it barely yields anything over official inflation. I would generally expect a broad market rally if T-bonds started to decline, at least for a while. When rates keep rising and the dollar keeps falling, then, well, we have a real problem for stocks <g>

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