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I hold a B.S. in Accounting. "[T]he function of the margin-of-safety is, in essence, that of rendering unnecessary an accurate estimate of the future. If the margin is a large one, then it is enough to assume that future earnings will not fall far below those of the past in order for an investor... More
  • Yield On Stocks And 10-Year Treasuries: 1871 - 2013 2 comments
    Nov 7, 2013 2:27 PM

    Below is the long-term relationship between 10-year treasuries and the yield on common stocks. Warren Buffett graudated around 1951 when the yield on the S&P was about 16%. Great timing.

    (click to enlarge)

    Common stocks have sold much closer to the price of the 10-year post 1970 -- although it is unclear what exactly explains the change of the relationship. Is it inflation? Is it globalization? Is it a change of the accounting rules (thereby changing the definition of earnings)? Is it because of the new computational trading architecture? Is it because people who experienced the collapse of stock prices from 1929 through 1932 -- a 90% decline -- died off?

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  • The_Hammer
    , contributor
    Comments (5047) | Send Message
    It's called a Fiat dollar based monetary system which began when the gold window closed by Nixon in Aug 1971 due to a run on US gold reserves.
    7 Nov 2013, 03:01 PM Reply Like
  • Jesse Sobelson, CFA
    , contributor
    Comments (96) | Send Message
    What's with the recently huge divergence? '10 through '13
    8 Nov 2013, 03:44 PM Reply Like
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