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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (8935)	11/2/1997 12:30:00 PM
From: Bucky Katt	Respond to of 94695

Tommaso--The most important parts of the Economist article are> Measures of value also suggest that share prices are far above those that would have made sense in the past. One such, the ratio of share prices to the replacement cost of firms' assets (the "q" ratio), is around its highest level since at least 1925, according to calculations by Andrew Smithers and Stephen Wright, two British analysts. The dividend yield (dividend as a percentage of share price) on the S&P 500, at roughly 1.6%, is lower than it has ever been in this century. Recent research by John Campbell of Harvard University and Robert Shiller of Yale has also come up with a disturbing finding. They examined what happened after each of the 29 occasions since 1872 when the dividend yield had fallen below its average of 4.73%. On each occasion until this one, the dividend yield eventually returned to the mean. And overwhelmingly, the reason was falling real share prices rather than rising real dividends. If history were to repeat itself in this way, the Dow would fall by two-thirds in real terms.