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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: TREND1 who wrote (7500)	11/22/2001 10:23:42 AM
From: pompsander	Read Replies (1) \| Respond to of 99280

Happy Thanksgiving to all. Steve, one of my favorite Thanksgivings was spent in London at the Texas Embassy mexican restaurant...built in the building that used to hold the Texas embassy when it was a republic in the 1830s. Great memories.

To: TREND1 who wrote (7500)	11/22/2001 12:05:15 PM
From: Steve Lee	Read Replies (1) \| Respond to of 99280

Thanks Larry, While it is helpful to understand what the Fed valuation model is, it seems to require some assumptions: 1) Rates will stay the same 2) The stock or stocks you have bought will not suffer poorer earnings than expected at any point in the future. The way I see it, neither of those assumptions are valid, so there is much more risk holding stocks than holding treasuries. Thus I can't equate the two without assigning a risk discount to the stocks. Of course, your upside is higher in stocks too so some may prefer to assign an upside premium to stocks. So it seems to come down to how you think the company is going to do wrt earnings, and how you think rates are going to look. In otherwords, you need to look at fundamentals. Following the trend might statistically give you better returns than trying to find fundamentally undervalued stocks, but the Fed model doesn't hold water as an excuse to accept current valuations IMO.