Ben Graham's Corner

 

Bubble

News!

The Bond Vigilantes have returned!

Chart above 30 year Treasury Bond yields.

The Bond Vigilantes are back demanding higher rates to compensate for inflation and the level of U.S. indebtedness!

The 30 Treasury bond has crossed over into the 5% range along with long term investment grade corporate bonds nearing the 6% handle.  At the same time the S&P 500 valuation matrix measured by the Shiller PE spouting massive overvaluation at (as of 7-17-2026) 41.52!

Benjamin Graham stated so eloquently "The danger to investors’ lies in concentrating their purchases in the upper levels of the market..."  To put it more bluntly the chances of having sub par average annual returns (underperforming bonds) for the U.S. stock market (measured by the S&P 500) is substantial. 

Below is Ben Graham’s Corner a monthly publication for this blog.  I’ve updated to todays data highlighting the vast overvaluation of the U.S. market.  

Ben Graham's Corner

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]

Lump Sum any amount greater than yearly salary.

PE10  .........41.52
Bond Rate....5.59%

EYC Ratio = 1/PE10 x 100 x 1.1 / Bond Rate

2.00+ Stocks on the give-away-table!

1.75+ Safe for large lump sums & DCA

1.30+ Safe for DCA

1.29 or less: Mid-Point - Hold stocks and purchase bonds.

1.00 or less: Sell stocks - Purchase Bonds

0.50 or less:  Stock Market Crash Alert!  

Purchase 30 year Treasury Bonds! 

Current EYC Ratio: 0.47(rounded)

As of  7-17-2026
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 is any dollar amount greater than one year salary.

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.....

Common Sense Investing:
The Papers of Benjamin Graham