Expected Real Returns on BAA, AAA, and 10 Year Treasuries

If you recall, in our last article we calculated historical risk spreads between various asset classes.  Not content to leave that topic in an unfinished state, here's the results of some further calculations - this time looking at debt vis-a-vis itself - we compare last week's asset classes to inflation expectations at the time... (Oh, you … [Read more...]

The Risk Spread Premium – (Almost) A Century of Data

A recent comment on one of our CAPE articles recently sent us digging for data on the long term perception of risk in the market.  For our purposes, we're interested in risk tolerance and, specifically, the difference in yields between various forms of debt.  Why is that important?  Well - we could argue all day about valuations in the stock market … [Read more...]

More on Shiller’s CAPE vs. The Ten Year Treasury Yield

We recently covered (graphically, anyway) the relationship between the Ten Year Treasury Yield, Shiller's CAPE (inverted) and the S&P 500 Index.  Although it was sort of possible to estimate the returns that followed, we'd be a bit uneasy if we forced you to do too much squinting - truly, you don't want your eyes to end up like mine.  If that … [Read more...]

Shiller CAPE vs. Ten Year Treasury Yields

We recently finished a five piece epic series on total stock market valuations - a task which will pay dividends for quite a while in questions and new article ideas, it seems.  Recently, our friend Jordan asked about how Treasury yields (or, specifically, 'zero risk' investments) affect valuation on the stock market in general.  Let's take this … [Read more...]

Inflation and Dividend Adjusted S&P 500 Performance

Back in March, we here at Don't Quit Your Day Job... reported the actual all time high in the S&P 500 using the only methodology that matters - adjusting for inflation and reinvesting dividends.  Since there was a fair bit of excitement (and bubble talk!) when the NASDAQ closed over 4000 on Tuesday for the first time since September 7, 2000, … [Read more...]

Stock Cash Flow and Dividend Analysis Calculator

Two methods which are often used to guess the underlying value of a stock are the discounted cash flow analysis and the dividend discount model.  Since ownership of a stock is a claim on future earnings, discounting that cash into the future is one way to get a hold on what a stock is 'worth' according to your estimates. This calculator uses … [Read more...]

Is the Stock Market Overvalued? The Finale.

This is the end... my only friend.  The end. We've taken you on a journey in the last 4 pieces - everywhere to academia to Omaha to main street - just to bring you back here with that same question burning in your brain. "Well, is the market overvalued?" you may still be asking, or "what does all of this mean?". I'm not cruel enough to … [Read more...]

Is The Stock Market Overpriced? Part IV

We've gone from Ivory Tower to Wall Street and back to Ivory Tower in this discussion about trying to divine the proper valuation for the stock market.  However, the vast majority of investors (if not an outright majority of wealth) come in a far more down to earth form - the individual investor, or , if you prefer, Main Street. This article is … [Read more...]

Is the Stock Market Overpriced? Part II

On Monday we brought you our brief examination (anything without a calculator involved is 'brief' here on DQYDJ) of recent Nobel Prize winner Robert Shiller's cyclically adjusted P/E ratio and what it meant for today's pricing in the S&P 500. For those of you who just found our site, you might not be familiar with Shiller's work.  That's … [Read more...]

Is the Stock Market Overpriced? Part I

If you've read Don't Quit Your Day Job... for a while, you've likely noticed the tension between us three writers over whether or not markets are rational and whether or not market irrationality is worth attempting to exploit due to transaction costs and risks. See Part I – Robert Shiller See Part II – Warren Buffett See Part III – James … [Read more...]