Wednesday, June 2, 2010

Even More on 'Equity Valuation'

Following my post Equity Valuation Matters, I received a request to show the results in real terms (presented here).

As I said then:

Please note this still misses a HUGE sources of return (dividends), which accounts for a much larger share of actual returns than people think. An almost identical amount as change in index in fact (dividend yield has averaged 4.49% since 1871, while returns on the index have averaged 4.45% over that same time frame). It makes the current ~2% dividend yield look awfully small.

I will look to show results of total S&P 500 return vs. the Fair Value method next week.
Here goes...

Source: Irrational Exuberance


  1. If you think the multiple used in the analysis makes sense (the past 60 year S&P to GDP multiple) is fair, we are just about at fair value.

  2. Well thats a relief. 10 Years and we are still at fair value, what a ride.