Thursday, May 28, 2009 3:00:04 PM
Hi Rich, Re: Short Treasury vs Stock Dividend.............
Here's something that I look at relative to "risk." If we assume the 13 week Treasury is essentially risk free, then we can compare its yield to that of stocks' median dividends to get a feel for the relative risk of being "in" or "out" of the stock market.
This shows relatively recent history. I have data going back to the early '80s. The graph is generated by subtracting Value Line's Median Dividend from the 13 Week Treasury Rate of the same week. A high positive number (above 3.35) would be "bearish" for stocks and "bullish" for short treasuries (maybe long treasuries, too).
Going the other direction, if the short treasury rate is pathetic as it is right now and Value Line's median dividend is still reasonably attractive (+2.6%p.a.) it would favor owning stocks instead of short treasuries.
The 10th Percentile of my database since the mid '90s shows up at -0.9 (green line) while the 90th Percentile is 3.35 (red line). I am sure that for various maturities of Treasuries one could establish similar types of charts. Right now this graph is favoring Stocks over short Treasuries. Back in '07 it was warning that stock dividends were weak compared to owning short Treasuries.
Hope this helps,
Tom
Here's something that I look at relative to "risk." If we assume the 13 week Treasury is essentially risk free, then we can compare its yield to that of stocks' median dividends to get a feel for the relative risk of being "in" or "out" of the stock market.
This shows relatively recent history. I have data going back to the early '80s. The graph is generated by subtracting Value Line's Median Dividend from the 13 Week Treasury Rate of the same week. A high positive number (above 3.35) would be "bearish" for stocks and "bullish" for short treasuries (maybe long treasuries, too).
Going the other direction, if the short treasury rate is pathetic as it is right now and Value Line's median dividend is still reasonably attractive (+2.6%p.a.) it would favor owning stocks instead of short treasuries.
The 10th Percentile of my database since the mid '90s shows up at -0.9 (green line) while the 90th Percentile is 3.35 (red line). I am sure that for various maturities of Treasuries one could establish similar types of charts. Right now this graph is favoring Stocks over short Treasuries. Back in '07 it was warning that stock dividends were weak compared to owning short Treasuries.
Hope this helps,
Tom
Port Washington, WI 53074
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