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Been a while since I posted this ... thought the group might like to see how
the market is doing on a yield basis. The bottom graph does an exceptionally
good job of relating TBill yields and S&P Earnings. Any of three events
brings the ratio down: 1) a decline in TBill yields, 2) an increase in S&P
Earnings, 3) a decline in S&P price. Inverse events run the ratio up.
Calculations are shown in both sub-graphs.
Of note is the fact that the ratio remains at historically high levels in
spite of recent declines in _both_ TBill yields and S&P price. This suggests
that it will take further declines in both items to bring the ratio back to
historical norms ... assuming that S&P earnings do not decline. Should S&P
earnings begin declining, even greater declines in S&P price and/or TBill
rates will be required.
Of course, there is no assurance that the ratio must/will return to normal
levels anytime soon, however eventually ....
Earl
Attachment Converted: "c:\eudora\attach\SPYIELDS2.gif"
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