Zeev's Turnips Patch-No Politics (ZEEV)

[Zeev Hed]

In the last half century, the risk free rate of returns and total returns on the SP 500 were always closely relatively close (coming out of the thirties depression, people had little appetite for equity risks and thus the very high returns on equities, it was also associated with dividends that where highers than treasuries rate), and from that point of view the SP 500 is not particularly expensive right now. Yet we have to go through a period like the 70' where for a long stretch returns on safe investments are better than on the SP500 since stocks are intrinsically more risky. It may take some time before people are going to be willing to accept lower returns on safe treasuries (presumably because a period of earning growth lay ahead). That set of curves is one of the many reasons I penned that April 20th 2000 major warning of an impending long term secular bear, we are maybe in the third inning, a ong winter lay ahead, even though, periods of major thaws will interrupt what I still believe is the major trend.