Trend Analysis LLC: Confirmation from the Bond Market on Weakness in Equity Prices

Tuesday, September 25, 2007

Confirmation from the Bond Market on Weakness in Equity Prices

The chart of the 10 year note yield looks as if it wants to move lower, which translates into higher bond prices. This chart helps to confirm my theory of a potential mini collapse in stock prices.

I will also be winding down all of my long stock positions in the aggressive trading portfolio as I started today. This will leave only trading positions that will be in line with the prevailing trend.

No comments:

Post a Comment

Do's and Do Nots of Successful Investing

1) Buy and Hold Doesn't Always Work.
2) Cut your losers, and let your winners ride.
3) Don't fall in love with your stock; it won't fall in love with you.
4) Don't fight "the tape" (the trend).
5) Don't have more than 5% at risk in any one position.
6) Don't miss a good one by being too concerned with the exact price you pay.
7) Have patience and stick with your discipline.
8) Neglected sectors often turn out to offer good values.
9) Not selling a stock for a gain, simply because the taxes, is a bad idea.
10) Real estate cycles are not the same as stock market cycles.
11) There's usually only one reason corporate insiders buy stock.
12) Try to buy a stock when it has few friends.
13) When a stock hits a new high, it's not time to sell. Something is going right.
14) When all you're left with is hope, get out.
15) You can learn more from your bad moves than your good.

One of My Favorite Fundamental Tools

***Lets talk a little about the value measurement of earnings yield.While this measurement is being more widely followed, it remains a very key tool in obtaining the true value of a security.
***The earnings yield is nothing more that the opposite or reciprocal of the P/E ratio.It helps to put value in a more easily understandable light as it can be measured againstthe prevailing 10 year note yield.The premise is that if the earnings yield on the market or whatever stock you wish to measure is greater than the 10 year note yield then the security is undervalued.
***Now this is a gross simplification of the theory, but it gives you a reference point.Don't forget also that the 10 year T- note yield is a before tax measurement and the earnings yield is an after tax measurement. Therefore even if the earnings yield is less that the 10 year note yield, there is still a possibility of a security being undervalued.
***This gives you a very strong starting point as to where to go from here with the tool. Especially the after tax aspect of the earnings yield.Here is an example of the calculation for the earnings yield on a stock.Let us suppose a stock has a P/E ratio of 12. In order to get the earnings yield we just invert the 12/1 fraction to 1/12 and the yield comes to 8.33%. Compare this to the 4.5% 10 year note yield and you have quite the undervalued security. Maybe even more so than the 8.33% dictates as this is the after tax yield. To convert it to the before tax yield simply multiply the 8.33% by 1.33 for the 33% corporate tax bracket. The before tax yield becomes 11.08% which makes this security very undervalued.
***You can also use the earnings yield of an entire index such as the S&P 500 to get a feel for the current state of value in the market. Above this post you will see a visual of the current earnings yield model that shows the S&P 500 to be quite undervalued. This does not take into account the after tax effect which would move the target for the S&P 500 even higher.
***The earnings yield is a great tool and should be in every good investors toolbox.

Lawyers - Always in The Mix Somehow : >

Website disclaimer (1) Introduction This disclaimer governs your use of our website; by using our website, you accept this disclaimer in full. If you disagree with any part of this disclaimer, do not use our website. (2) Intellectual property rights Unless otherwise stated, we or our licensors own the intellectual property rights in the website and material on the website. Subject to the licence below, all our intellectual property rights are reserved. (3) Licence to use website You may view, download for caching purposes only, and print pages [or [OTHER CONTENT]]1 from the website, provided that: (a) you must not republish material from this website (including republication on another website), or reproduce or store material from this website in any public or private electronic retrieval system; (b) [you must not reproduce, duplicate, copy, sell, resell, visit, or otherwise exploit our website or material on our website for a commercial purpose, without our express written consent;]2 (c) [you must not edit or otherwise modify any material on the website.]3 (4) Limitations of liability4 The information on this website is provided free-of-charge, and you acknowledge that it would be unreasonable to hold us liable in respect of this website and the information on this website. Whilst we endeavour to ensure that the information on this website is correct, we do not warrant its completeness or accuracy; nor do we not commit to ensuring that the website remains available or that the material on this website is kept up-to-date. To the maximum extent permitted by applicable law we exclude all representations, warranties and conditions (including, without limitation, the conditions implied by law of satisfactory quality, fitness for purpose and the use of reasonable care and skill). Our liability is limited and excluded to the maximum extent permitted under applicable law. We will not be liable for any direct, indirect or consequential loss or damage arising under this disclaimer or in connection with our website, whether arising in tort, contract, or otherwise – including, without limitation, any loss of profit, contracts, business, goodwill, data, income, revenue or anticipated savings. However, nothing in this disclaimer shall exclude or limit our liability for fraud, for death or personal injury caused by our negligence, or for any other liability which cannot be excluded or limited under applicable law. (5) Variation5 We may revise this disclaimer from time-to-time. Please check this page regularly to ensure you are familiar with the current version. (6) Entire agreement This disclaimer constitutes the entire agreement between you and us in relation to your use of our website, and supersedes all previous agreements in respect of your use of this website. (7) Law and jurisdiction This notice will be governed by and construed in accordance with English law, and any disputes relating to this notice shall be subject to the exclusive jurisdiction of the courts of England. (8) Our contact details The full name of our company is Trend Analysis LLC You can contact us by email to clearmarkettrend@gmail.com This disclaimer is based on a freely-available template created and distributed by http://www.website-law.co.uk/.

Trend Analysis LLC

Tuesday, September 25, 2007

Confirmation from the Bond Market on Weakness in Equity Prices

No comments:

Trend Analysis LLC Headline Animator

PLEASE VISIT BLOGELITES AND VOTE EACH TIME YOU VISIT - HELP MY EXPOSURE

NEVER MISS A FREE UPDATE

Sometimes They're With You Sometimes They're Against You

Welcome to the Investing Forum Where all are Equal in the Eyes of Mr. Market.

Some Things Never Change

FeedBurner FeedCount

Click On The Link For The Financial Calculator

Do's and Do Nots of Successful Investing

Great Information Here

Blog Archive

One of My Favorite Fundamental Tools

A Bit About Me

Get an Edge With These Sites

One Very Important Lesson

Subscribe via email

Lawyers - Always in The Mix Somehow : >