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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: HeyRainier who wrote (18358)	5/12/1998 2:24:00 AM
From: studdog	Respond to of 50167

Ike, Yardeni's Fed model suggests stock prices 25.8% overvalued as of tonight. This has been trending up most of the last 3 weeks as bond yields and stock prices have risen. This model got as high as 30% in Oct. 1987 and was about 26% in August 1997. a Drop in stock prices corrected the overvaluation in 1987 and a drop in yields corrected the 1997 overvaluation. If bond yields go higher we will hit the 30% overvalued point if 10 year bonds hit 5.97% (probably 6.3 on the 30 year) I know this is just a model but it is has been accurate over the years and the market has correlated with it pretty well. Since I don't see significant upward earnings revisions in the near future, bond yields have got to fall precipitously to justify current stock price levels. ( Current fair value for S&P is around 880 based on this model) Just grist for the mill. Karl