Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: TREND1 who wrote (72444)	5/29/2002 11:37:47 AM
From: Crimson Ghost	Read Replies (1) \| Respond to of 99280

Larry: More from the Fed on stock valuations. A new model shows the S&P 500 still 20% overvalued. From the KING REPORT Crudele notes a SF Fed report (FRBSF.org) by Sr. economist Kevin Lansing that states, “…throughout history, occurrences of major speculative bubbles have generally coincided with the emergence of some superficially plausible "new era" theory. Even with a pickup in trend productivity growth, investors may have overreacted by heedlessly extrapolating the temporary surge in earnings growth of the late 1990s far into the future. Some recent studies provide support for this idea. Chan, et al. (2001) show that equity analysts' forecasts of long-term earnings growth rates have been consistently too optimistic and have exhibited low predictive power for the actual earnings growth rates subsequently achieved.” Lansing notes that a better model for stock valuations relates not only the 20-year bond yield to expected earnings, but also adjusts valuations for the previous 20-years volatility. “Given a current 20-year government bond yield of about 5.5% and employing the end-of-sample volatility measures for stocks and bonds, the model predicts a P/E ratio of 24.1. Applying this multiple to the S&P's estimate of $36.34 for reported earnings in 2002 yields a predicted value of 876 for the index--about 20% below the current level. Fitted P/E ratio from the model captures 70% of the variance in the observed P/E ratio over the sample period 1946 to 2001 (monthly data from 1926-1945 are used to compute the initial volatility measures). In contrast, the inverse bond yield alone does a poor job of capturing movements in the observed P/E ratio. These results confirm Asness's finding of a strong empirical link between valuation ratios and the return volatilities experienced by investors.” Conclusion: “Over the long history of the stock market, high P/E ratios have been transitory phenomena. Campbell and Shiller (2001) show that, sooner or later, the P/E ratio has tended to adjust back towards its long-run average. These adjustments have taken place mainly through changes in stock prices (P) rather than through changes in earnings (E)…the model predicts a downward adjustment in stock prices.”

To: TREND1 who wrote (72444)	5/29/2002 11:44:03 AM
From: Zeev Hed	Read Replies (1) \| Respond to of 99280

What did we do wrong to be bombed on 9/11, to some, it is quite enough that Jews exists to murder them. No excuse needed. It happened before, it may happen again unless we are vigilant. Zeev

To: TREND1 who wrote (72444)	5/29/2002 11:57:35 AM
From: Follies	Respond to of 99280

What are the Jews doing wrong to be getting bombed? And I bet Nicole Simpson did something real bad to deserve what she got.

To: TREND1 who wrote (72444)	5/29/2002 12:07:55 PM
From: augieboo	Respond to of 99280

OT -- Larry, this may be a paraphrase but it explains a lot nonetheless: The late Golda Meir, the heroic Israeli prime minister, once said peace would come to the Middle East when Arabs love their children more than they love killing Jews. detnews.com