Stocks
Continue at Nose Bleed Levels!
Avoid Stocks until Reasonable Prices Avail Themselves Once Again!
DYI: Ben Graham’s formula for purchasing or sale
of stocks on a market basis is simply genius in its simplicity. Even for those who hate math the formula [see
below] is actually basic arithmetic that can be done with any grocery store 4
function calculator. Just plug in the
numbers from left to right and bingo you have your answer.
The
EYC Ratio [Ben Graham’s formula] is another tool showing that stocks remain at
nose bleed levels. Investing in stocks
at this market level will highly likely result in loss or sub atomic returns
despite a 20 year plus holding period.
Simply put stocks valuations remain insanely elevated and should be
avoided until reasonable prices avail themselves once again.
Margin of Safety!
Central Concept of Investment for the purchase of Common Stocks.
"The danger to investors lies in concentrating their purchases in the upper levels of the market..."
Stocks compared to bonds:
Earnings Yield Coverage Ratio - [EYC Ratio]
EYC Ratio = 1/PE10 x 100 x 1.1 / Bond Rate
1.75 plus: Safe for large lump sums & DCA
1.30 plus: Safe for DCA
1.29 or less: Mid-Point - Hold stocks and purchase bonds.
1.00 or less: Sell stocks - Purchase Bonds
Current EYC Ratio: 0.92 (rounded)
As of 03-01-19
Updated Monthly
Updated Monthly
PE10 as report by Multpl.com
Bond Rate is the rate as reported by
Vanguard Long-Term Investment-Grade Fund Investor Shares (VWESX)
DCA is Dollar Cost Averaging.
Lump Sum any amount greater than yearly salary.
PE10 ..........30.42
Bond Rate.....3.93%
Lump Sum any amount greater than yearly salary.
PE10 ..........30.42
Bond Rate.....3.93%
Over a ten-year period the typical excess of stock earnings power over bond interest may aggregate 4/3 of the price paid. This figure is sufficient to provide a very real margin of safety--which, under favorable conditions, will prevent or minimize a loss......If the purchases are made at the average level of the market over a span of years, the prices paid should carry with them assurance of an adequate margin of safety. The danger to investors lies in concentrating their purchases in the upper levels of the market.....
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