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Strategies & Market Trends : Shorting SPY for fun and profit. -- Ignore unavailable to you. Want to Upgrade?

To: Berney who wrote (67)	11/9/1997 11:53:00 PM
From: studdog	Read Replies (1) \| Respond to of 346

nice work Berney, it's rassuring in some ways how that model gives similar numbers to the Fed model, which is : forward earnings/ current 10 yr bond yield. i.e. 49.70/.058 = 842. The 49.70 was the september estimate. I think that earnings are going to be revised downward a fair amount due to decrease demand in Asia and inablility to raise prices., I would favor the 8% growth rate. Karl

To: Berney who wrote (67)	11/9/1997 11:55:00 PM
From: studdog	Read Replies (1) \| Respond to of 346

Berney: What are the "interest environment " figures? Karl

To: Berney who wrote (67)	11/10/1997 8:09:00 AM
From: Premier	Read Replies (2) \| Respond to of 346

Berney: $49.70 is I/B/E/S compiled next 12 months S&P earnings. Yardeni had mentioned 10% growth rate as of September. I like the Fed model because of simplicity and backtesting. The model showed 32% overvaluation just before 87 crash! It may or may not work in real life but it does give us some guidance on time to become aggressive or conservative. I commend you for having done a lot of work on Graham's formula.The problem with the formula is that a small change in growth rate assumption magnifies the change in end result. Back to Fed model. As Karl mentioned growth should decline from Yardeni's 10%. The cause could be wage pressure in US and firms' inability to pass 100% of inflation to consumers. 10 year bond yeild is likely to remain unchanged due to countervailing factors of inflation at home and currency and market crisis abroad. It seems to me that market overvaluation will increase resulting in downward adjustment in SPY. Premier.