Right now, there is no best bet on the market
By Scott Burns | May 7, 2006
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Viewed in terms of earnings yield (stock earnings per share divided by price), low-quality stocks at 18 times uncertain forward earnings have an earnings yield of 5.56 percent, slightly less than the earnings yield on five-year TIPS. High-quality stocks, meanwhile, have an earnings yield of 6.85 percent, only a small premium over no-risk Treasury obligations.
What's the bottom line?
This year is developing a really creepy resemblance to 1987. That's when both interest rates and stocks rose — until October, when stocks plunged 20 percent in two days.
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One has to learn the lessons of the past before they put you on your butt. A 20% drop in the market would certainly be typical of the secular bear market. A further market run up might break us out of the secular bear pattern. BUT, the economic factors around the current environment don't seem to favor that outcome. But what do I know.
Reinke Faces Life 