EUCOM Economic Analysis - Part I

[Firn]

Interestingly when I reread "The intelligent investor" Graham makes in Chapter 20 the same case, which I must have internalized, about 1972 bond and stock market.

Assume in a typical case that the earning power is 9% on the price and that the bond rate is 4%.; Then the stockbuyer will have an average annual margin of 5% accruing in his favor. Some of the exess is paid to him in the dividend rate; even though spent by him it enters into his overall investment result. The undistributed balance is reinvested into the business for his account [Ideally increasing the future earnings, intelligent buy-back of stocks].

Earning power or earning yield are very roughly the inverse of the price/earning ratio. Of course it just a facet and the book earnings don't tell the whole story and Graham used additional means to screen stocks and analyse enterprises.

I forgot to mention just high the price of some older bonds is right now to get to as such low overall yield. It is indeed a liquidity flight into the perceived safety of good enterprise bonds. A good deal of that big Bertha liquidity was also key to bring down the spreads on PIS gov. bonds.

Worldwide the corporate bonds seem to close in on the historic low:

The potential for issuance to continue surging is strong as companies seek to refinance debt at extremely low cost.

The Barclays index only needs a slight nudge to hit a record-low yield. The index finished Monday at 3.37% -- a six-month low and just one basis point away from the all-time low set on Aug. 4, 2011. The index dates back to 1973.

Basically it should get even better for shareholder, as the companies into which they are invested have to pay considerably less interest. How could I forget to add that point in the first place.