Monday, April 02, 2007

The infamous or famous FED Model indicates that equities are the cheapest in 20 years

The infamous or famous FED Model indicates that equities are the cheapest in 20 years and some fund managers report to being wildly optimistic. As many of you know I have been wildly optimistic about equity valuations since 2000 to no avail. I generally like to blow against the wind and it makes me a bit uncomfortable with this growing choirs of raging bulls. But let me repeat once again, the stock since 2000 has barely outperformed cash and on an adjusted real basis underperformed cash .This is simply unheard of . By my calculations the DOW Jones Index should be somewhere around 13400 just to be even with inflation .Corporate profits though appearing to be decelerating make up the largest part of the GDP in years. Enormous pools of cash are sitting on the sidelines and in corporate and hedge fund coffers. Like the early 1980’s buyouts and takeovers are rampant. What we all seem to be looking for is the catalyst that will spark a new bull market. You gotta think this market has got to move higher from hear.

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