To: Wyätt Gwyön who wrote (146517 ) 1/29/2002 5:35:51 PM From: pater tenebrarum Read Replies (1) | Respond to i agree with you - the t-bill rate is not a useful benchmark, least of all in a deflationary era bear market. if it were, you'd have been compelled to buy stocks all the way down from '29 to '32, an activity said to have wiped out a great many investors of the period, far more than were killed in the actual crash. i rather like the idea of using the TIPS yield, but i like even better a proposition made in Barron's by someone two or three years ago, which was to use a composite of government and corporate bond yields. granted, it's not a 'risk free' yield one is comparing stocks to then, but if you think it through, there are more aspects to investing in stocks and the returns one can expect than a mere comparison with risk free yields (the 'pure' opportunity cost). in fact, it is precisely because the current models of measuring risk premia are failing that so many WS strategists have got it so horribly wrong and have caused their clients great losses with their quantitative allocation models (which appear to be wired exactly wrong practically all of the time).
