Tx 5d5fab066bcd15cf8a91ea7c74dab62852e3d8fb@17093284
Included in block
17,093,284
at 2017-11-10 07:16:36 (UTC)
Raw transaction
| ref_block_num | 53,906 |
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| ref_block_prefix | 1,121,859,585 |
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| expiration | 2017-11-10 07:26:30 |
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| operations | | 0. | | 0. | comment |
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| 1. | | parent_author | "" |
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| parent_permlink | money |
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| author | numpypython |
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| permlink | predicting-the-next-stock-market-crash-the-bond-stock-earnings-yield-crash-prediction-model |
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| title | "Predicting the next stock market crash - The Bond-Stock Earnings Yield Crash Prediction Model" |
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| body | "
The stock market keeps on roaring and shows little sign of an impending correction. Frustrating times if you're a value investor as asset prices don't make much sense at these elevated levels. Timing the correction can be hard though. In the famous words of John Maynard Keynes, the market can stay irrational longer than you can remain solvent.
## The BSEY Model
One of the great things about living next to the library is having access to a lot of interesting books that one wouldn't normally come across. A gem of a book that i recently found was "The Adventures of a Modern Renaissance Academic in Investing and Gambling" by William Ziemba.
In it, he talks about the Bond-Stock Earnings Yield Crash Prediction Model which has a good track record predicting many of the previous crashes including the one in 2008, the dot-com bubble etc.
Basically, stocks and bonds compete for money. When interest rates are low, money goes to stocks. When interest rates are high, money flows to bonds instead. I had similar thoughts but the tricky part is determining when the switch occurs. For the BSEYD model, the warning sign flashes red when the yield of the most liquid long term bond minus the earnings yield of the stock market is higher than 3%. I'm simplifying it but that is a quick way to calculate this.
## Where are we now?
The current trailing 12 month PE of the S&P500 is 24.33, which implies an earnings yield of 4.1%. The 30 year bond yield is at 2.8% now. So if we calculate the BSEYD, we get -1.3%. That's a far way off from the 3% that would be needed to get us out of the stock market.
What this suggests is that barring any extraneous shocks to the market, the market is likely to keep going up for a while now and it is better to remain invested in the market even at these elevated levels.
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Title image credit: pexels
Stock market yields: wsj
Note: This isn't financial advice. You need to do your own due diligence but i hope this helps." |
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| json_metadata | {"tags":["money","finance","writing","research","blog"],"image":["https://steemitimages.com/DQmU9PDPGXPp7CHMLvMT37of4kPpjj75oDSYd3zZgER36Wq/pexels-photo-241544.jpeg","https://steemitimages.com/DQmVxA2w1s5KzynuvDGDN7987o6qTgnbCVMgdybHnWkjipK/PE.JPG"],"app":"steemit/0.1","format":"markdown"} |
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| 1. | | 0. | vote |
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| 1. | | voter | numpypython |
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| author | numpypython |
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| permlink | predicting-the-next-stock-market-crash-the-bond-stock-earnings-yield-crash-prediction-model |
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| weight | 10,000 |
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| extensions | [] |
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| signatures | | 0. | 2061b745536ab5234e2ba35cfae9a8fd2b827df5a45394c4794d4fee2a28940d89676c4a672cd546d216d732fc1ec6f04f06126e29271e797506463fa66a013804 |
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| transaction_id | 5d5fab066bcd15cf8a91ea7c74dab62852e3d8fb |
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| block_num | 17,093,284 |
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| transaction_num | 0 |
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