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 : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Death Sphincter who wrote (7753)	3/8/1999 5:56:00 PM
From: Mad2	Read Replies (1) \| Respond to of 99985

From 3/8 WSJ Heard on the Street A "very discomforting perspective" if one assumes earnings and bond yeald are supposed to have anything to do with valuations. FED FRETTING: Federal Reserve Chairman Alan Greenspan again sounded worried about stock-price levels two weeks ago, and with good reason. As of Friday, a simple model of the stock market made famous by the Fed suggests stocks are overvalued by 29.6%. The last time it was more overvalued, according to this model, was in September 1987, just before the crash, when it was 39.6% overvalued, calculates Joseph Abbott, equity strategist at IBES International. The model simply takes the "earnings yield" on stocks -- that's the inverse of the price-earnings ratio of the Standard & Poor's 500-stock index, based on analysts' expected earnings in the coming 12 months, and compares that with the 10-year bond yield. Mr. Abbott puts the earnings yield at 4.09%; the 10-year bond yielded 5.30% Friday. At these levels, expect stocks to do a lot worse than bonds in the coming 12 months, Mr. Abbott says. interactive.wsj.com