Roger's 1998 Short Picks Message Board

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Strategies & Market Trends : Roger's 1998 Short Picks

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To: Zeev Hed who wrote (17739)	3/18/1999 9:04:00 AM
From: Alastair McIntosh	Read Replies (2) of 18691

Zeev, a good indication of current market valuation is the fed funds model which now indicates that the market is 27.7% overvalued. This model is on Yardeni's site at: yardeni.com The model assumes that the forecast operating earnings on the S&P 500 for the next 12 months divided by the S&P 500 index should be equal to the yield on the 10-year U.S. treasury bonds. This valuation is now at its highest point since 1987. The model may actually be underestimating the overvaluation since it is using earnings forecasts for 1999 and 2000 that predict a 15% annual growth rate in earnings. If this growth rate prediction is high and/or if there is any upward move in interest rates the overvaluation will of course increase. I believe that the correction will be more than 20% Al

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