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Pastimes : Ask Mohan about the Market

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To: Defrocked who wrote (6947)	11/4/1997 9:59:00 AM
From: studdog	Read Replies (2) of 18056

defrocked I can't figure out how to copy or send an acrobat file. If anyone wants to give the directions I will try to post the 8 page text of Yardeni's analysis. It's great. It just points out the tight connection between 10 year bond rates, forward earnings estimates, and the price of the S&P 500. Currently using the model developed by the Fed, with the 10 year bond at 5.9% and forward earnings estimates (next 12 months) for the S&P of around $.50 we have a fair price of 847. This can be corrected by: 1) bond yields going down further (at 5.5% fair value is 909) 2) estimates for earnings being raised, and 3) prices come down. The whole question of where the market is going depends on which of these things (or combination) you think is most likely. With the market relatively overvalued with this model, Greenspan is in a jam because if he raises interest rates, and the model holds, the market could really tank. That is why I think he has been so intent on jawboning the market down. It would give him some breathing room. Karl

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