Dow Trend Earnings (aka Fed model)
Credit for the chart below goes to Mike Susak of La Jolla Trading, Inc. (West Coast Options Fund, L.P.) (Any errors and omissions are mine)
How to read the chart below?
Premise: $100 yielding 5% in Bonds=$5, and $100 invested in a Company with a P/E (Price/Earnings)of 20=$5 - is the same thing.
Example: On 10/21/02 the Dow's 52 week earnings = $389 & 10 Year T-Note = 4.13%
Based on the chart below, the DJIA should be trading between 9262 and 9725.
Why are we are trading at 8323? These are "trailing" earnings - and the future for Dow earnings is always uncertain (RISK & FEAR premium).
Ten Year T-Notes are guaranteed.
The current numbers as of 12/31/2023 are $1422.55 in Earnings and Ten Year Notes have a yield of 3.84%
After rounding things up and down a bit - to be equivalent, the Dow should be trading at $37,031
Notes & Links
Warren Buffett: "interest rates are to the value of assets what gravity is to matter."
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Risk / Fear Premium
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Date:
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Dow
Earnings:
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Ten Year Notes yield:
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Dow "should be" trading at:
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Dow "is" trading at:
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Risk / Fear Premium:
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Dec 31
2023
|
1422.55
|
3.84
|
37031
|
37689
|
658
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Sep 4
2023
|
1417.67
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4.25
|
26990
|
34837
|
7848
|
June 17
2023
|
1534
|
3.72
|
41237
|
34299
|
-6937
|
Dec 30
2022
|
1562
|
3.88
|
40258
|
33147
|
-7111
|
Sep 4 2022
|
1788.14
|
3.64
|
49121
|
33614.8
|
-15507
|
May 29
2022
|
1745.31
|
2.75
|
63455
|
33212
|
-30243
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Dec 31
2021
|
1602.94
|
1.5
|
106867
|
36338
|
-70529
|
Oct 31
2021
|
1601
|
1.65
|
97030
|
35819.56
|
-61210
|
Apr 4 2021
|
942.84
|
1.74
|
54195
|
33153
|
-21042
|
Jan 1
2021
|
1023
|
0.96
|
106563
|
30606.46
|
-75957
|
Oct 18
2020
|
1058
|
0.79
|
133914
|
28606
|
-105308
|
June 2
2020
|
1195.76
|
0.66
|
181061
|
25742
|
-155319
|
Jan. 20
2020
|
1352.63
|
1.83
|
73880
|
29348
|
-44532
|
Feb.26 2017
|
998.55
|
2.38
|
41956
|
20821.76
|
-21135
|
Jan. 4
2016
|
1073.47
|
2.24
|
47923
|
17425.03
|
-30498
|
Aug. 23
2015
|
1075.65
|
2.18
|
49312
|
16459.75
|
-32852
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Nov. 30
2014
|
1138.93
|
2.36
|
48220
|
17828
|
-30392
|
Jan. 3 2014
|
1045.43
|
3.0
|
34833
|
16470
|
-18363
|
June 18
2013
|
937.6
|
2.12
|
44226
|
15318
|
-28908
|
Sep 28 2012
|
909.97
|
1.66
|
54817
|
13437
|
-41380
|
Jan 3 2012
|
924.53
|
2.02
|
45769
|
12397.38
|
-33372
|
Sep 2
2011
|
896.38
|
2.28
|
32298
|
11240
|
-21058
|
June 22
2011
|
878.99
|
2.97
|
29596
|
12190
|
-17406
|
Dec. 31 2010
|
784.31
|
3.36
|
23333
|
11577.51
|
-11756
|
Sep. 27
2010
|
714.17
|
2.54
|
29173
|
10860
|
-18313
|
May 28
2010
|
687.81
|
3.23
|
21269
|
10136
|
-11133
|
Dec. 12
2009
|
576.41
|
3.49
|
16516
|
10471
|
-6045
|
Sep. 14
2009
|
619.79
|
3.47
|
18446
|
9626
|
-8820
|
June 15
2009
|
686.52
|
3.7
|
18555
|
8799.26
|
-9756
|
Apr. 13
2009
|
293.42
|
2.95
|
9946
|
8083.38
|
-1863
|
Jan. 5 2009
|
487.84
|
2.18
|
21927
|
9034.69
|
-12893
|
Nov 8
2008
|
477.97
|
3.96
|
11312
|
8943
|
-2369
|
June 31 2008
|
147.63
|
4.09
|
3607
|
11288
|
+7681
|
Mar 31
2008
|
237.72
|
3.39
|
7012
|
12216.4
|
+5204
|
Dec 29
2007
|
283.62
|
4.23
|
6714
|
13365.87
|
+6651
|
Aug 31 2007
|
830.94
|
4.60
|
18065
|
13357.74
|
-4708
|
Mar 30
2007
|
729.18
|
4.60
|
15848
|
12354.35
|
-3494
|
Dec 31
2006
|
571.84
|
4.70
|
12167
|
12463
|
+296
|
June 5
2006
|
532.85
|
5.05
|
10657
|
11048.72
|
+391
|
Dec. 26
2005
|
568.59
|
4.44
|
12793
|
10883.27
|
-1910
|
Aug. 14, 2005
|
581.69
|
4.23
|
13,735
|
10,600
|
-3135
|
Jan. 31, 2005
|
600.65
|
4.13
|
14,528
|
10,489
|
-4039
|
Oct. 24, 2004
|
583
|
3.98
|
14,630
|
9,944
|
-4686
|
Oct. 21, 2002
|
389
|
4.13
|
9,419
|
8,323
|
-1096
|

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Risk / Fear Premium
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