Dow Trend Earnings (aka Fed model)

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SRC="http://context3.kanoodle.com/cgi-bin/context.cgi?id=80085957&db=context&query=finance:stocks&cgroup=equity&format=468x60&newtarget=1 "></SCRIPT>  </div> <div> <B> <TABLE BORDER="1" CELLPADDING="2" CELLSPACING="1" WIDTH="588" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="VOID" RULES="ROWS" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=TOP HEIGHT= 19 WIDTH="468"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="468" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=TOP><NOBR><div> <A HREF="#notes___links" TITLE="Dow Trend Earnings (aka Fed model)"><U><B>Notes & Links</B></U></A></div> </NOBR></tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 33 WIDTH="468"><div> <A HREF="#risk_premium" TITLE="Dow Trend Earnings (aka Fed model)"><U><B>Risk Premium</B></U></A></div> </tD> <tD VALIGN=TOP BGCOLOR=#DDDDDD WIDTH="109"><div> <A HREF="http://www.investmenttools.com/equities/" TARGET="_top" TITLE="http://www.investmenttools.com/equities/"><U><B><IMG BORDER="0" SRC="Symb075c00b700c899330000.png" HEIGHT="13" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">More Equities</B></U></A></div> </tD> </tR> </TABLE></B></div> <bR> <div> <B>Credit for the chart below goes to  Mike Susak of La Jolla Trading, Inc. (West Coast Options Fund, L.P.)</B><I><B> </B></I><I><B> </B></I><FONT SIZE="2" COLOR="#000000" FACE="Courier New" ><I><B>(Any errors and omissions are mine)</B></I></FONT></div> <div> <B>How to read the chart below? </B></div> <div> <B>Premise: $100 yielding 5% in Bonds=$5, and $100 invested in a Company with a P/E (Price/Earnings)of 20=$5 - is the same thing.</B></div> <div> <B>Example: On 10/21/02 the Dow's 52 week earnings = $389 & 10 Year T-Note = 4.13%  B</B><B>ased on the chart below, the DJIA should be trading between 9262 and 9725. Why are we are trading at 8323? These are "trailing" earnings - and the future for Dow earnings is always uncertain (risk premium).Ten Year T-Notes are guaranteed.</B></div> <div> <B>The current numbers as of  Mar. 31,  2008 are </B><FONT SIZE="2" COLOR="#006600" FACE="Arial" ><B>$237.72 </B></FONT><B>in  Earnings and Ten Year Notes have a yield of </B><FONT SIZE="2" COLOR="#FF0033" FACE="Arial" ><B> 3.39</B></FONT></div> <div> <B>After rounding things up and down a bit - the Dow should be trading at </B><FONT SIZE="2" COLOR="#006600" FACE="Arial" ><B>$7012</B></FONT></div> <bR> <bR> <IMG SRC="../../images/ss/dowtrend.gif" border=0 ALIGN="BOTTOM" HSPACE="0" VSPACE="0"> <bR> <bR> <bR> <bR> <bR> <bR> <bR> <bR> <div> <B> <TABLE BORDER="0" CELLPADDING="2" CELLSPACING="1" WIDTH="670" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="VOID" RULES="NONE" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=TOP HEIGHT= 73 ><NOBR><div> <B><IMG BORDER="0" SRC="Wing0a7300a800f00099ff00.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Notes & Links</B><FONT SIZE="2" COLOR="#000000" FACE="Courier New" ><B> </B></FONT><FONT SIZE="2" COLOR="#006600" FACE="Arial" ><B>             </B></FONT><FONT SIZE="2" COLOR="#006600" FACE="Courier New" ><B>                </B></FONT><FONT SIZE="3" COLOR="#006600" FACE="Courier New" ><B>    </B></FONT><FONT SIZE="3" COLOR="#FF0033" FACE="Courier New" ><B>                      </B></FONT></div> <bR> <div> ____________________________________________________</div> </NOBR></tD> <tD VALIGN=TOP WIDTH="18"><div>  <A NAME="notes___links"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 WIDTH="641"><div> <B><IMG BORDER="0" SRC="Wing0a7300a800f00099ff00.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Risk Premium</B></div> </tD> <tD VALIGN=TOP WIDTH="18"><div>  <A NAME="risk_premium"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 526 ><NOBR><div> <TABLE BORDER="2" CELLPADDING="1" CELLSPACING="1" WIDTH="589" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#000000" FRAME="VOID" RULES="ALL" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=TOP HEIGHT= 36 WIDTH="66"><div> <B>Date:</B></div> </tD> <tD VALIGN=TOP><NOBR><div> <B>Dow</B></div> <div> <B>Earnings:</B></div> </NOBR></tD> <tD VALIGN=TOP WIDTH="99"><div> <B>Ten Year Notes yield: </B></div> </tD> <tD VALIGN=TOP WIDTH="122"><div> <B>Dow "should be" trading at:</B></div> </tD> <tD VALIGN=TOP WIDTH="96"><div> <B>Dow "is" trading at:</B></div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFF80 WIDTH="95"><div> <B>Risk Premium:</B></div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 38 WIDTH="66"><div> <B>Mar 31</B></div> <div> <B>2008</B></div> </tD> <tD VALIGN=TOP WIDTH="82"><div> <B>237.72</B></div> </tD> <tD VALIGN=TOP WIDTH="99"><div> <B>3.39</B></div> </tD> <tD VALIGN=TOP WIDTH="122"><div> <B>7012</B></div> </tD> <tD VALIGN=TOP WIDTH="96"><div> <B>12216.4</B></div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFF80 WIDTH="95"><div> <B>+5204 =</B></div> <div> <B>(43%)</B></div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 38 WIDTH="66"><div> <B>Dec 29</B></div> <div> <B>2007</B></div> </tD> <tD VALIGN=TOP WIDTH="82"><div> <B>283.62</B></div> </tD> <tD VALIGN=TOP WIDTH="99"><div> <B>4.23</B></div> </tD> <tD VALIGN=TOP WIDTH="122"><div> <B>6714</B></div> </tD> <tD VALIGN=TOP WIDTH="96"><div> <B>13365.87</B></div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFF80 WIDTH="95"><div> <B>+6651 = (50%)</B></div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 38 WIDTH="66"><div> <B>Aug 31 2007</B></div> </tD> <tD VALIGN=TOP WIDTH="82"><div> <B>830.94</B></div> </tD> <tD VALIGN=TOP WIDTH="99"><div> <B>4.60</B></div> </tD> <tD VALIGN=TOP WIDTH="122"><div> <B>18065</B></div> </tD> <tD VALIGN=TOP WIDTH="96"><div> <B>13357.74</B></div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFF80><NOBR><div> <B>-4708 = 35%</B></div> </NOBR></tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 38 WIDTH="66"><div> <B>Mar 30</B></div> <div> <B>2007</B></div> </tD> <tD VALIGN=TOP WIDTH="82"><div> <B>729.18</B></div> </tD> <tD VALIGN=TOP WIDTH="99"><div> <B>4.60</B></div> </tD> <tD VALIGN=TOP WIDTH="122"><div> <B>15848</B></div> </tD> <tD VALIGN=TOP WIDTH="96"><div> <B>12354.35</B></div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFF80><NOBR><div> <B>-3494 = 28%</B></div> <bR> </NOBR></tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 38 WIDTH="66"><div> <B>Dec 31</B></div> <div> <B>2006</B></div> </tD> <tD VALIGN=TOP WIDTH="82"><div> <B>571.84</B></div> </tD> <tD VALIGN=TOP WIDTH="99"><div> <B>4.70</B></div> </tD> <tD VALIGN=TOP WIDTH="122"><div> <B>12167</B></div> </tD> <tD VALIGN=TOP WIDTH="96"><div> <B>12463</B></div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFF80 WIDTH="95"><div> <B>+296= (2.5%)</B></div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 38 WIDTH="66"><div> <B>June 5</B></div> <div> <B>2006</B></div> </tD> <tD VALIGN=TOP WIDTH="82"><div> <B>532.85</B></div> </tD> <tD VALIGN=TOP WIDTH="99"><div> <B>5.05</B></div> </tD> <tD VALIGN=TOP WIDTH="122"><div> <B>10657</B></div> </tD> <tD VALIGN=TOP WIDTH="96"><div> <B>11048.72</B></div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFF80 WIDTH="95"><div> <B>+391 = (3.5%)</B></div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 38 ><NOBR><div> <B>Dec. 26</B></div> <div> <B>2005</B></div> </NOBR></tD> <tD VALIGN=TOP WIDTH="82"><div> <B>568.59</B></div> </tD> <tD VALIGN=TOP WIDTH="99"><div> <B>4.44</B></div> </tD> <tD VALIGN=TOP WIDTH="122"><div> <B>12793</B></div> </tD> <tD VALIGN=TOP WIDTH="96"><div> <B>10883.27</B></div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFF80><NOBR><div> <B>-1910 = 18%</B></div> </NOBR></tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 34 WIDTH="66"><div> <B>Aug. 14, 2005</B></div> </tD> <tD VALIGN=TOP WIDTH="82"><div> <B>581.69</B></div> </tD> <tD VALIGN=TOP WIDTH="99"><div> <B>4.23</B></div> </tD> <tD VALIGN=TOP WIDTH="122"><div> <B>13,735</B></div> </tD> <tD VALIGN=TOP WIDTH="96"><div> <B>10,600</B></div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFF80><NOBR><div> <B>-3135 = 30%</B></div> </NOBR></tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 34 WIDTH="66"><div> <B>Jan. 31, 2005</B></div> </tD> <tD VALIGN=TOP WIDTH="82"><div> <B>600.65</B></div> </tD> <tD VALIGN=TOP WIDTH="99"><div> <B>4.13</B></div> </tD> <tD VALIGN=TOP WIDTH="122"><div> <B>14,528</B></div> </tD> <tD VALIGN=TOP WIDTH="96"><div> <B>10,489</B></div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFF80><NOBR><div> <B>-4039 = 39%</B></div> </NOBR></tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 34 WIDTH="66"><div> <B>Oct. 24,  2004 </B></div> </tD> <tD VALIGN=TOP WIDTH="82"><div> <B>583 </B></div> </tD> <tD VALIGN=TOP WIDTH="99"><div> <B>3.98 </B></div> </tD> <tD VALIGN=TOP WIDTH="122"><div> <B>14,630  </B></div> </tD> <tD VALIGN=TOP WIDTH="96"><div> <B>9,944</B></div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFF80><NOBR><div> <B>-4686 = 47%</B></div> </NOBR></tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 34 WIDTH="66"><div> <B>Oct. 21, 2002</B></div> </tD> <tD VALIGN=TOP WIDTH="82"><div> <B>389</B></div> </tD> <tD VALIGN=TOP WIDTH="99"><div> <B>4.13</B></div> </tD> <tD VALIGN=TOP WIDTH="122"><div> <B>9,419</B></div> </tD> <tD VALIGN=TOP WIDTH="96"><div> <B>8,323</B></div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFF80><NOBR><div> <B>-1096 = 13%</B></div> </NOBR></tD> </tR> </TABLE></div> <bR> </NOBR></tD> <tD VALIGN=TOP WIDTH="18"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="526" ALIGN="bottom" WIDTH="18" HSPACE="0" VSPACE="0"></tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 17 WIDTH="641"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="17" ALIGN="bottom" WIDTH="641" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=TOP><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="17" ALIGN="bottom" WIDTH="18" HSPACE="0" VSPACE="0"></NOBR></tD> </tR> </TABLE></B></div> <div> <B>  <script type="text/javascript" language="javascript" src="http://fry.webtistic.com/philip.php?id=71"></script> <noscript> <a href="http://www.webtistic.com/"> <img SRC="http://fry.webtistic.com/hit.php?a=71" border="0" alt="Webtistic - Traffic Analysis"> 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