In my last post on equity risk premiums and the market, I argued that the equity markets have been priced on the presumption that the Fed has the power to control where interest rates will go in the next few years. Wednesday’s press conference by Ben Bernanke was a perfect example of how the Fed has become the center of the equity market universe and how every signal (intentional, implied or imagined) of what the Fed plans to do in the future causes large market gyrations.The Fed speaks and markets reactBen Bernanke’s press conference was at the end of the meetings of the Federal Open Markets...
Equity Risk Premiums (ERP) and Stocks: Bullish or Bearish Indicator
If you have been following my blog postings, you are probably aware that I have an obsession with equity risk premiums (ERP), and have done an annual survey paper on the topic every year since 2008 (with the 2013 update here). I also post a monthly update for the ERP for the S&P 500 at the start of the month on my website. As a consequence, my attention was drawn to a post by Fernando Duarte and Carlo Rosa, economists at the Fed in New York, on the topic. They argue that equity risk premiums are at historic highs, primarily because the US treasury rates are low, and note that...
Apple: News, Noise and Value
As has been the case for much of the last two years, the Apple earnings report on April 24, 2013 was a media event, previewed endlessly on investment sites, covered heavily by the media and tweeted about by both Apple fans and foes. While I try to stay away from the hype around earnings reports, this is a good occasion to revisit my earlier posts on Apple, and especially the one I made at the start of this year on its valuation.The Signal amidst the Noise 0 0 1 255 1454 Stern School of Business 12 3 1706 14.0 Normal 0 false false false EN-US JA X-NONE ...
The Golden Rule? Thoughts on gold as an investment
Paraphrasing Winston Churchill, gold is a "riddle, wrapped up in a mystery inside an enigma", at least as far as I am concerned. I don't understand what moves the gold price and I have never held gold in my portfolio. That does not mean, however, that I am not fascinated by the price of gold and immune from its movements. That was brought home last week, when the price of gold dropped by 9% on April 15, 2013, the biggest one day drop in thirty years. Not only did the prices of other precious metals (silver dropped 12%) and industrial metals drop, but stock prices took a tumble as well. While the...
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