A.I.M. Users Bulletin Board

[lionhead0]

Hi Clive; RE Laddering

OK, ok, I'll get back to work here! ;) I have a long list of stock picks ready to go at the right moment. The market will advise us of that point.

Your laddering idea is part of my plan. The advantages of it are clear to me. I agree with you that relative valuation measures of varying stripes and colours are problematic because of their use of the big "E" in calculating them. The dividend metric is more tangible and easier to work with as it represents actual cash. Dividends are real and so are stock prices; there are no estimates or biases.

So, my idea of using the ladder with an appropriate indexing protocol is one way to go. Alternatively, one can construct a "risk premium/discount" metric that would roughly yardstick the premium needed to buy in a bear market and the discount needed to sell in a bull market topping situation. The components of that would include the dividend yield as part of the stock return. In filling the warehouse, one wants to buy when the risk premium is high, and sell when the risk premium has turned into a risk discount.

Best, Tim

P.S. I have to reread a few times your previous post. It will sink in so I have a better grasp of it. Thanks for laying it all out for all to read.