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<DIV><FONT color=#000000 size=2>I've followed a similar indicator for years,
however I use the 13wk TBill instead of the 10 year and I use actual S&P
earnings as reported in Barron's rather than forecasted. Personally, I don't
give a flying flip for forecasted earnings ... they are no more useful than
brokerage analyst buy/sell recommendations (for those not in the know, brokerage
analysts are loath to use the word sell and buy recommendations are not
infrequently affected by the prospect of investment banking business from the
companies they are analyzing). On a historical basis using real S&P500
earnings (now declining) and current lower rates, the market has returned to the
same extremely dangerous levels seen last July - more than 30% over valued.
Attached is a GIF I shot a month or so ago.</FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT> </DIV>
<DIV><FONT color=#000000 size=2>Something over a year ago, Greenspan talked
about irrational exuberance in the markets, but when he stared irrational
exuberance in the eye this summer, he blinked and cut rates. He is now standing
helplessly as the asset bubble grows ever bigger. I believe that in the years to
come, Greenspan will be remembered for permitting a replay of 1929. While
Greenspan believes (read hopes) the Fed can manage the asset deflation much
better than in 1929, he has already proven that he can not make a soft landing
out of a bursting bubble.</FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT> </DIV>
<DIV><FONT size=2>Earl</FONT></DIV>
<BLOCKQUOTE
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<DIV><FONT face=Arial size=2><B>-----Original Message-----</B><BR><B>From:
</B>Marc Hara Lawrence <<A
href="mailto:ml1@xxxxxxxxxxxxxxxxxxx";>ml1@xxxxxxxxxxxxxxxxxxx</A>><BR><B>To:
</B>RealTraders Discussion Group <<A
href="mailto:realtraders@xxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxx</A>><BR><B>Date:
</B>Tuesday, December 08, 1998 4:43 PM<BR><B>Subject: </B>greenspan
indicator<BR><BR></DIV></FONT>
<DIV><FONT color=#000000 size=2>I ran across and interesting article in
Barrons' last week that talks about the "Greenspan
indicator" Basically it compares the earnings yield to the 10
year yield on Treasury notes where the earnings yield =
forecasted</FONT><FONT color=#000000 size=2> profits next 12 months/ s and p
500 value. </FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT> </DIV>
<DIV><FONT color=#000000 size=2>Yardeni in the article mentions that there
is trouble when the equity market is 20-30% overvalued. We currently
stand at 10%. The obvious problem with this model is the ability to
forecast profits since analysts are so often wrong. If profits are
less than expected we can see higher risk in this market at least through
Greenspans eyes.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT color=#000000 size=2>Any opinions, comments?</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>What sources do people use that forecast S and P
earnings. Are any of these considered the "gold
standard"?</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Good trading</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Marc Lawrence</FONT></DIV></BLOCKQUOTE></BODY></HTML>
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