Tuesday, May 03, 2005


The last time the real earnings yield on the S&P 500 was greater than the yield on the long treasury bond was in 1982. The explosion in stock prices, small stocks by June and S&P by late August, was a sight to behold. The good Lord willing, I expect to see a similar explosion this year.

The last time the S&P earnings yield approached the long bond yield was around 1995. You may recall that the market from 1995 to 2000 was quite good.

The last time we had the big inflation scare was in October of 1995. The PPI core rate of inflation approached the CPI core rate of inflation. Cries were heard throughout the land but stocks went up.

The last time economic conditions were most similar to now was in 1995, however, they were also many similarities back in 1986. The signs of slower growth turned out to be welcome. Inflation cooled and stocks did well.

One simple rule to make money is to stay fully invested from the middle of the decade to near the end of the decade. This decade looks to be playing out the same pattern.