Money and Finance
- Links
Q&A with Guy Spier about his book, The Education of a Value Investor (LINK) Buffett’s Private Analysis of Geico in 1976: ‘Extraordinary’ But ‘Mismanaged’ [H/T Lincoln] (LINK) Aswath Damodaran on corporate break-ups, using EBay and PayPal...
- Hussman Weekly Market Comment: Short Horizon, Long Horizon
Over history, and including the past decade, properly normalized valuations have remained a powerful guidepost for full-cycle and long-term returns, particularly on the horizon of 7-10 years. On that front, the current price/revenue multiple of the S&P...
- Fight The Fed Model: The Relationship Between Stock Market Yields, Bond Market Yields, And Future Returns - By Cliff Asness (december 2002)
Abstract: The "Fed Model" has become a very popular yardstick for judging whether the U.S. stock market is fairly valued. The Fed Model compares the stock market's earnings yield (E/P) to the yield on long-term government bonds. In contrast, traditional...
- Hussman Weekly Market Comment: Valuing The S&p 500 Using Forward Operating Earnings
It is impossible to properly estimate long-term cash flows based on a single year of earnings, regardless of whether one uses actual net earnings or projected operating earnings. It is impossible to properly value the stock market based on a single year...
- Hussman Weekly Market Comment From May 21, 2007: How Much Do Interest Rates Affect The Fair Value Of Stocks?
In recent months, I've used a wide variety of analytical methods (discounted cash flows, normalized earnings, price/peak earnings calculations, etc) to show that stocks are currently priced to deliver unusually poor long-term returns – stated simply,...
Money and Finance
Vanguard: Forecasting stock returns: What signals matter, and what do they say now?
Found via The Idea Farm.
Executive summary. Some say the long-run outlook for US stocks is poor (even ‘dead’) given the backdrop of muted economic growth, already-high profit margins, elevated government debt levels, and low interest rates. Others take a rosier view, citing attractive valuations and a wide spread between stock earnings yields and Treasury bond yields as reason to anticipate US stock returns of 8%-10% annually, close to the historical average, over the next decade. Given such disparate views, which factors should investors consider when formulating expectations for stock returns? And today, what do those factors suggest is a reasonable range to expect for stock returns going forward?
We expand on previous Vanguard research in using US stock returns since 1926 to assess the predictive power of more than a dozen metrics that investors would know ahead of time. We find that many commonly cited signals have had very weak and erratic correlations with actual subsequent returns, even at long investment horizons. These poor predictors include trailing values for dividend yields and economic growth, the difference between the stock market’s earnings yield and Treasury bond yields (the so-called Fed Model), profit margins, and past stock returns.
- Links
Q&A with Guy Spier about his book, The Education of a Value Investor (LINK) Buffett’s Private Analysis of Geico in 1976: ‘Extraordinary’ But ‘Mismanaged’ [H/T Lincoln] (LINK) Aswath Damodaran on corporate break-ups, using EBay and PayPal...
- Hussman Weekly Market Comment: Short Horizon, Long Horizon
Over history, and including the past decade, properly normalized valuations have remained a powerful guidepost for full-cycle and long-term returns, particularly on the horizon of 7-10 years. On that front, the current price/revenue multiple of the S&P...
- Fight The Fed Model: The Relationship Between Stock Market Yields, Bond Market Yields, And Future Returns - By Cliff Asness (december 2002)
Abstract: The "Fed Model" has become a very popular yardstick for judging whether the U.S. stock market is fairly valued. The Fed Model compares the stock market's earnings yield (E/P) to the yield on long-term government bonds. In contrast, traditional...
- Hussman Weekly Market Comment: Valuing The S&p 500 Using Forward Operating Earnings
It is impossible to properly estimate long-term cash flows based on a single year of earnings, regardless of whether one uses actual net earnings or projected operating earnings. It is impossible to properly value the stock market based on a single year...
- Hussman Weekly Market Comment From May 21, 2007: How Much Do Interest Rates Affect The Fair Value Of Stocks?
In recent months, I've used a wide variety of analytical methods (discounted cash flows, normalized earnings, price/peak earnings calculations, etc) to show that stocks are currently priced to deliver unusually poor long-term returns – stated simply,...