Go to the Amazon.com link below for TIMING THE MARKET by Deborah Weir (Wiley, 2005).
Email: DebWeir@WealthStrategies.bz
Take her class at the NY Institute of Finance: nyif.com/courses/fimk_1014.html.
Wednesday, August 09, 2006
The Fed's pause in raising rates should help the stock market. Invest conservatively until the yield curve becomes normal.
5 comments:
Anonymous
said...
Hello Debra, What is your opinion on the Tobin's Q statistic (see www.valuingwallstreet.com ) which suggests that the American stock market is about 30% overvalued? I bought the book "Valuing Wallstreet" back in late 1999 and it got me out of the market in time to avoid the 2000 crash.
I have a lot of respect for anything that got you out of the market before the crash. I haven't looked at the Q in a long time but will revisit. I doubt that the market is overvalued by 30%, however.
More on Tobin: "Tobin's Q is calculated by dividing the market value of a company by the replacement value of its assets. Many companies now seek to develop ways to measure intangible assets such as intellectual capital." Source: Wikipedia.com.
I prefer yield curve analysis because it is more precise than measuring the replacement value of anything. Intangible assets are particularly hard to value.
Hello Debra, I believe the book addressed intangibles. I recall it saying that Tobin's Q wasn't much use when used to measure a single company, but rather, was of great use when used to measure the market as a whole...in aggregate. They also stated that Q is a mean reverting statistic whereas most other measures of market valuation are not (like P/E).
Aside from Q, how does the market look based on average dividend yield..after adjusting for average payout ratios? I read somewhere that average divvy yield is 5 or 6% for the Dow.
Also..regarding Q, I would not use it as a buy/sell signal. This is stated in the book...but rather, as a backdrop indicator of the potential of the future market. Apparently in 1999, Q reached a 100 yr record high. In the first page or chapter of their book..they state..if you are in the American stock market..get out! and get out now!...or something to that effect. They were dead right and saved me my life's savings at the time. Of course I only followed their advice because the rest of the book made sense.
Also..if one looks at a long term graph of the market, say the Dow..one can see what begins to become a geometric rise in price and volume starting in the early 1980s. In my opinion, I think these was largely caused by the creation of IRAs and 401ks that encouraged lots of 'dumb' money to be automatically placed into the stock market. I believe this has caused market prices to rise faster than their earnings..causing overvaluation. The 2000 crash corrected much of this..but there is still some left that will take years to 'work through'.
What does this mean to me?...It suggests that the market will probably continue in a channel for some time as it has for the past 7 years or so until valuation gets in order. So for me, buy and hold is out. However, one can still buy and sell within the channel.
Regarding the market I try to address as many methods as possible..fundamental and technical.
And I think yield curve analysis is a superb addition to my tools and i thank you for your book. As I said, I eagerly await your next one....Morey
5 comments:
Hello Debra,
What is your opinion on the Tobin's Q statistic (see www.valuingwallstreet.com ) which
suggests that the American stock market is about 30% overvalued? I bought the book "Valuing Wallstreet" back in late 1999 and it got me out of the market in time to avoid the 2000 crash.
Morey
Dear Morey,
I have a lot of respect for anything that got you out of the market before the crash. I haven't looked at the Q in a long time but will revisit. I doubt that the market is overvalued by 30%, however.
Best,
Deb
More on Tobin: "Tobin's Q is calculated by dividing the market value of a company by the replacement value of its assets.
Many companies now seek to develop ways to measure intangible assets such as intellectual capital." Source: Wikipedia.com.
I prefer yield curve analysis because it is more precise than measuring the replacement value of anything. Intangible assets are particularly hard to value.
Hello Debra,
I believe the book addressed intangibles. I recall it saying that Tobin's Q wasn't much use when used to measure a single company, but rather, was of great use when used to measure the market as a whole...in aggregate. They also stated that Q is a mean reverting statistic whereas most other measures of market valuation are not (like P/E).
Aside from Q, how does the market look based on average dividend yield..after adjusting for average payout ratios? I read somewhere that average divvy yield is 5 or 6% for the Dow.
Also..regarding Q, I would not use it as a buy/sell signal. This is stated in the book...but rather, as a backdrop indicator of the potential of the future market. Apparently in 1999, Q reached a 100 yr record high. In the first page or chapter of their book..they state..if you are in the American stock market..get out! and get out now!...or something to that effect. They were dead right and saved me my life's savings at the time. Of course I only followed their advice because the rest of the book made sense.
Also..if one looks at a long term graph of the market, say the Dow..one can see what begins to become a geometric rise in price and volume starting in the early 1980s. In my opinion, I think these was largely caused by the creation of IRAs and 401ks that encouraged lots of 'dumb' money to be automatically placed into the stock market. I believe this has caused market prices to rise faster than their earnings..causing overvaluation. The 2000 crash corrected much of this..but there is still some left that will take years to 'work through'.
What does this mean to me?...It suggests that the market will probably continue in a channel for some time as it has for the past 7 years or so until valuation gets in order. So for me, buy and hold is out. However, one can still buy and sell within the channel.
Regarding the market I try to address as many methods as possible..fundamental and technical.
And I think yield curve analysis is a superb addition to my tools and i thank you for your book. As I said, I eagerly await your next one....Morey
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