Good Luck!

J

However, the old days of the Dow yielding “6% to 14%” may be gone forever. Check out this Warren Buffet article where he describes how in the 1920’s the bull run up was partly because investors generally realized stocks didn’t JUST pay dividends, but had a growth aspect. That was a new thing!

Arguably, earnings growth potential today I think is much higher than in horse and buggy days. An American worker is vastly more productive today due to technology, and efficiency across the board from manufacturing to transportation to the computer age. This higher productivity translates into higher wealth creation and higher annual growth in wealth creation. The greater wealth, in part, goes to the owners, or shareholders.

The market recognizes this higher earnings growth with higher multiples and therefore lower yields in general, so the market in general is a BUY today at about a 3% yield. Every fundamentals ratio you can use to value stocks indicates they are widely undervalued today, so I would not wait for Dow 5000-6000 and the corresponding 6% yield to buy. It might get that low, but Warren Buffet, at age 78, announced in October that soon he would be personally 100% invested in US equities. That is a hell of an endorsement for Dow 9000 from the greatest investor on the planet. And if he is wrong, he doesn’t have a lot of years to wait for it to come around. By 78, don’t most financial planners say you should be in fixed income, muni bonds, and the like?

I’m with Buffet and buying. I doubt we will see a fall to the S&P or Dow yielding 5%.

-Bond Yields vs Dividends

early 80’s one could get 10-12% in muni bonds & 14% T-bills/bond/cds

where are those rates now……..under inflation?

Spooky, you’re damned if you do and damned if you don’t… take a long term perspective that is. There is always something wrong with any one indicator. Best thing to do is to throw them in a pot and stir. The resulting broth is usually palatable.