“THEY’RE ALL SELLING? WELL, THEN, BUY!”

8/15/11

Maybe nothing here that is all this insightful, but at least it appears worth highlighting…

Bulls are pantingly telling us that stocks are cheap because, in the midst of last week’s frenetic trading, the dividend yield on the S&P surpassed that on the ten year treasury. But did those bulls stop to notice that the 10 year’s yield is 2.28% after I write this, up 4 basis points from its 2.24% yield of last Friday? While the 10 year yield is not at historic lows, it is close, so hurdling it, while perhaps more substantive than a victory of the Harlem Globetrotters over the Washington Generals, is no great shakes. If the S&P’s yield were to exceed an historic 10 year yield, whatever that might be for an appropriately long period of time, that would be something, but beating an artificially low (or at least beaten down by economic malaise, or worse) yield is no big deal.

Stocks may still be cheap. I don’t think so, but, as I’ve said before, I, like anyone else who opines on these matters, am as likely to be right as I am to be wrong. If stocks are cheap, however, the dividend yield is not among the weightiest pieces of evidence supporting that argument.