Can you split out oil shipments? The increase in pipeline shipments in the U.S. over the past year must surely have had an effect. Perhaps the mild weather might have reduced the demand for coal of late.

It certainly looks like it. The next Fed report on the monetary base will be released at 4.30 pm today

I agree, however one must compare with competing returns in the bond market viz:

www.talkmarkets.com/.../einstein-not-newton-more-helpful-to-understand-equity-markets

Where do these economists live? Do they ever look out of he window or check the weather channel?

I have no argument with your choice.

Tony

I do not apportion blame for the amount of debt or QE. I am merely trying to point out the consequences and their impact on the dividend discount value of the DJII that today is in excess of 32,000.

Over the past 35 years the price and the value of the DJII have had a correlation coefficient of 0.83. From this I suggest that price and value will move back into equilibrium and the pressure is on the price to move up.

Are you bullish yet?

Regards

Tony

I see no reference in your article to the different interest rate environment this year versus last year. Interest rates determine the discount rate at which earnings and dividends should be measured.

Comparing today's 30 year T bond Yield of 3.03% with the 3.62% yield of a year ago, the yield on the S&P 500 is too high at 2.01% relative to the 2.02% of last year.

The rise in the S&P over the past year from 1,760 to 1,946 is attributed to the 11.7% increase in the dividend.

Adding in just the change in the interest rate environment the S&P 500 should be trading at 2,325.

If one argues that interest rates are too low then short the bond market and hedge that by being long the S&P 500 or better still the DJII where the dividend discount VALUE stands at 29,626 versus its closing PRICE on Friday last of 16,805.

Please see my previous posts for more details

Tony Hayes CFA

Irrational fear has been in the equity market since Lehman. This accounts for the DJII PRICE remaining below its dividend discount VALUE since then. If there were no fear then the price would be in line with its value.

Unlike equities there is no fear in the bond market. If bonds are correctly priced then the DJII has a long way to move up to match its value of 30,000 and higher to 39,000 if the dividend payout ratio were to return to its historic level of 42%

I am aware of the risks if trying to catch a falling knife. However, the dividend discount value of the DJII is so high both on an historical basis and relative to price that it is worth the risk.

As there was no meaningful catalyst that sent the market down and with the 30 Year T bond rate hitting 2.75% on Wednesday while the price of the market was under 16,000 and falling I could not resist the opportunity of yelling "BUY" with value rocketing upward.

Tell me when you decide buy