Posts Tagged ‘“stocks are cheap” investors’

The Question “Are Stocks a Screaming Buy Relative to Bonds?” Creates False Premises

The Question "Are Stocks a Screaming Buy Relative to Bonds?" Creates False Premises

Courtesy of Mish

Josh Lipton writing for Minyanville is asking the question Are Stocks a Screaming Buy Relative to Bonds?

Dr. Ed Yardeni of Yardeni Research takes one side of the debate and says "stocks are cheap" according to a model, now dubbed the “Fed’s Stock Valuation Model”.

I am quoted in the article, taking a different view of course, but I want to add to the thoughts I expressed in the article.

First a few snips from Lipton’s article …

Certainly, by employing some basic measures to compare the relative value of stocks and bonds, equities appear attractive. Dr. Ed Yardeni of Yardeni Research made the case this morning that stocks seem cheap and bonds seem expensive according to a simple model that compares the market’s earnings yield to the US Treasury bond yield.

Yardeni first started studying this model after seeing it mentioned in the Federal Reserve Board’s Monetary Policy Report to the Congress dated July 1997. The strategist dubbed it the “Fed’s Stock Valuation Model” (FSVM), and that’s what it’s been called ever since.

During the week of August 13, Yardeni says, the forward P/E of the S&P 500 was 11.8. The forward earnings yield, which is just the reciprocal of the P/E, was 8.5%. The 10-year Treasury bond’s yield is 2.60% this morning. So its P/E, which is the reciprocal of the yield, is 38.5.

According to the FSVM, that means stocks are 64.8% undervalued relative to bonds.

James Swanson, chief investment strategist at MFS Investment Management, agrees that stocks now look cheap relative to bonds and that, as an asset class, equities boast more opportunity for investors looking ahead.

In short, the stock market is now priced for an economic future that Swanson thinks remains unlikely. “This only makes sense if the world is going into a deflationary scenario,” the strategist says. “Otherwise, this is a mispricing.”

Yes, stocks might look cheap relative to bonds, but that’s because the economic outlook remains bleak. Mike Shedlock, a well-known registered investment adviser for Sitka Pacific Capital Management, argues that the economy is already mired in deflation, a dangerous downward spiral in prices that will prove lethal for corporate profits.

"Why are Treasury yields low?" Shedlock asks. "It’s because the economy is in recession."

Furthermore, Shedlock argues that investors are ultimately best advised


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Chart School

Price and Volume Swing Analysis on Bitcoin and Silver

Courtesy of Read the Ticker

Many take guidance from news, pundits or advisors. Well sometimes the swings of price and volume are a better measure of what happens next.

The big boys do not accumulate or distribute in single 1 second trade, they build positions over weeks, months and years. They use price swings in the market to build or reduce positions, and you can see their intent by studying swings of price and volume and applying Tim Ord logic as written in his book called 'The Secret Science of Price and Volume: Techniques for Spotting Market Trends, Hot Sectors, and the Best Stocks'.

Tim Ord is a follower of Richard Wyckoff logic, his book has added to the studies of Richard Wyckoff, Richard Ney and Bob Evans.

Richard Wyckoff after years of...

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Phil's Favorites

60/40 is Dead. Again.

 

60/40 is Dead. Again.

Courtesy of 

Doing nothing has been one of the best strategies of the last few decades.

I’m talking about the tried and true 60/40 portfolio. 60% stocks. 40% bonds. You had to rebalance, so not exactly nothing, but as close to it as you can get.

Nothing and easy, however, aren’t the same thing. You had to sit through multiple 50% crashes in the stock market. You had to sit on your hands during periods where “everyone” was getting rich. On the spectrum of easy to impossible, doing “nothing” is closer to the latter.

How many people can stay the course for multiple decades? The investor’s principal challenge is to fight the urge to de-risk in a bear market and add risk in a bul...



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Zero Hedge

Ethereum's Turn To Outshine Bitcoin Is Coming, UBS Says

Courtesy of ZeroHedge View original post here.

After a stellar start to the year, which saw its price soar to an all time high above $4,100, trouncing virtually all of its crypto peers, Ethereum has stagnated in recent weeks, with its place in the spotlight taken by bitcoin whose impressive outperformance has been the result of now confirmed speculation that a bitcoin futures ETF is coming. It also meant that what has traditionally been a close correlation between the two largest cryptos has broken in favor of the larger peer; it would also suggest that ethereum is trading about $1000 cheap vs bitcoin.

...



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Digital Currencies

Ethereum's Turn To Outshine Bitcoin Is Coming, UBS Says

Courtesy of ZeroHedge View original post here.

After a stellar start to the year, which saw its price soar to an all time high above $4,100, trouncing virtually all of its crypto peers, Ethereum has stagnated in recent weeks, with its place in the spotlight taken by bitcoin whose impressive outperformance has been the result of now confirmed speculation that a bitcoin futures ETF is coming. It also meant that what has traditionally been a close correlation between the two largest cryptos has broken in favor of the larger peer; it would also suggest that ethereum is trading about $1000 cheap vs bitcoin.

...



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Politics

Steve Bannon faces criminal charges over Jan. 6 panel snub, setting up a showdown over executive privilege

 

Steve Bannon faces criminal charges over Jan. 6 panel snub, setting up a showdown over executive privilege

Defiant or following Trump’s direction? John Lamparski/NurPhoto via Getty Images

Courtesy of Kirsten Carlson, Wayne State University

The House committee investigating the Jan. 6 attack on the U.S. Capitol is tasked with providing as full an account as possible of the attempted insurrection. But there is a problem: Not everyone is cooperating.

As of Oct. 14, 2021, Steve Bannon, a one-tim...



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Biotech/COVID-19

Ivermectin is a Nobel Prize-winning wonder drug - but not for COVID-19

 

Ivermectin is a Nobel Prize-winning wonder drug – but not for COVID-19

While ivermectin was originally used to treat river blindness, it has also been repurposed to treat other human parasitic infections. ISSOUF SANOGO/AFP via Getty Images

Courtesy of Jeffrey R. Aeschlimann, University of Connecticut

Ivermectin is an over 30-year-old wonder drug that treats life- and sight-threatening parasitic infections. Its lasting influence on global health has been so profound...



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Promotions

Phil's Interview on Options Trading with TD Bank

TD Bank's host Bryan Rogers interviewed Phil on June 10 as part of TD's Options Education Month. If you missed the program, be sure to watch the video below. It should be required viewing for anyone trading or thinking about trading using options. 

Watch here:

TD's webinar with Phil (link) or right here at PSW

Screenshots of TD's slides illustrating Phil's examples:

 

 

&n...



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Kimble Charting Solutions

Crude Oil Cleared For Blast Off On This Dual Breakout?

Courtesy of Chris Kimble

Is Crude Oil about to blast off and hit much higher prices? It might be worth being aware of what could be taking place this month in this important commodity!

Crude Oil has created lower highs over the past 13-years, since peaking back in 2008, along line (1).

It created a “Double Top at (2), then it proceeded to decline more than 60% in four months.

The countertrend rally in Crude Oil has it attempting to break above its 13-year falling resistance as well as its double top at (3).

A successful breakout at (3) would suggest Crude Oil is about to mo...



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ValueWalk

Managing Investments As A Charity Or Nonprofit

By Anna Peel. Originally published at ValueWalk.

Maintaining financial viability is a constant challenge for charities and nonprofit organizations.

Q4 2020 hedge fund letters, conferences and more

The past year has underscored that challenge. The pandemic has not just affected investment returns – it’s also had serious implications for charitable activities and the ability to fundraise. For some organizations, it’s even raised doubts about whether they can continue to operate.

Finding ways to generate long-term, sustainable returns for ...



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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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