Saturday, September 29, 2012

Strong Long-term Dividend Growth Rate


Here's a graph I was surprised by.  It shows the annual growth rate for the real dividends on the S&P 500 index over the past 10-years.  Recent numbers are approaching 4% (ie. real dividends today are 4% per year higher than 10 years ago).

Aside from the big dip during the Great Recession in 2008/2009, the rate had been trending this way since the dot-com-bust.


Sunday, September 16, 2012

The Drought Continues

In a previous article (link) I talked about how the S&P 500 was near the biggest drought ever in real terms (with dividends re-invested).  Since then, we crossed the record and have now had 144 months without a new high (12 years!), in contrast to a 143-month drought that ended in January 1985.

However, the S&P has been on somewhat of a run lately, so it is only 8% away from reaching the previous high set 12 years ago.  It will be interesting to see how much higher this 144 goes before resetting the count to 0.  I'm bullish that it will be soon, but we'll see!

Sunday, August 12, 2012

Another update on US and Canadian Equities

In September 2011, I posted a graph on the ratio of EWC (Canadian equities) and SPY (S&P 500)... see here.  In March 2012 I posted an update showing the ratio had moved from 0.225 to 0.203.  Today (August 12, 2012), the ratio is down to 0.193!

Friday, May 04, 2012

The Correlation Conundrum And What To Do About It

The Correlation Conundrum And What To Do About It

http://seekingalpha.com/article/552251-the-correlation-conundrum-and-what-to-do-about-it?source=feed

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China’s banks

China's banks

http://www.economist.com/node/21554234

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Which Price Ratio Best Identifies Value Stocks?

Which Price Ratio Best Identifies Value Stocks?

http://www.gurufocus.com/news/173432/which-price-ratio-best-identifies-value-stocks

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Retirement Calculations Using Value Approach

Retirement Calculations Using Value Approach

http://www.valuewalk.com/2012/05/retirement-calculations-using-value-approach/?utm_source=rss&utm_medium=rss&utm_campaign=retirement-calculations-using-value-approach

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Whitney Tilson Explains BKS Reversal; T2 up 26% YTD

Whitney Tilson Explains BKS Reversal; T2 up 26% YTD

http://www.valuewalk.com/2012/05/whitney-tilson-explains-bks-reversal-t2-up-26-ytd/?utm_source=rss&utm_medium=rss&utm_campaign=whitney-tilson-explains-bks-reversal-t2-up-26-ytd

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Sunday, April 08, 2012

Historical Real Return on Retained Earnings for the S&P500


Here's a chart using the S&P500, showing the return on retained earnings for the past 5 years at each point (the data goes back about 75 years).  I use the real earnings increase from 5 years ago to now, and divide it by the sum of retained real earnings over that time.

This seems to indicate that there is usually a sustained period of positive real returns on retained earnings for a few years before it turns back.  I was a bit surprised to see 35-40% as the peak, meaning that for every dollar retained over 5 years, the earnings grow by $0.35 to $0.40 on the dollar.  I guess that is offset by the poor years in between where all those retained earnings are lost (and then some).

When you factor in that the payout ratio of the S&P500 has gone from ~60% at the beginning of this period to ~30% right now, this effect is likely to be a much larger part of stock price variation going forward.

Over the next 5 years, if the payout ratio stays at 30%, and the retained earnings return is 30%, you'd expect the S&P500's real earnings to be at about double what they are today... even if the PE multiple doesn't change, that chalks up to 15% return per year!


Saturday, March 31, 2012

Predicting droughts - How long can stocks stay below the last high?

The S&P 500 is close to breaking a new record in a bad way... if you take the real value of the S&P500 (divide the nominal value by CPI to account for inflation), and re-invest dividends, you can create an index that reflects the real experience of a buy-and-hold investor (ignoring tax).  The graph below shows for any given month, the number of months that have gone by without breaking the last high in this value.

The last time the number of months went really high was for the 12 years between January 1973 and January 1985 - January 1985 was a new high even though the real S&P500 was 1.56 (vs. 2.77 in 1973) - that's the noticeable impact from dividend re-investment.

As of April 1, 2012, it has been 139 months without a new high in this metric.  To avoid breaking the 1985 record, the real value of the S&P500 would have to jump by another 12% in the next 5 months.  That level of jump is obviously not outside the question (it's about the same as the jump from January 2012 to now).

Stay tuned to see if we set a new record drought or not!

Thursday, March 15, 2012

Update on Canadian-to-US equities

A few months ago, I posted a graph on the ratio of EWC (Canadian equities) and SPY (S&P 500)... see here.

Today that ratio is more like 0.203, which is on the way lower than the 0.225 that we had in September.

Is a short on the EWC (or other commodity-related indices) a good insurance policy?

Monday, February 13, 2012

Emerging markets have their mojo back

A sign of over bullishness?

Emerging markets have their mojo back

http://rss.cnn.com/~r/rss/money_markets/~3/dIjR1D7VOHM/index.htm

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Warren Buffett: Why stocks beat gold and bonds

Warren Buffett: Why stocks beat gold and bonds

http://rss.cnn.com/~r/fortunefinance/~3/5iR8GI3ThMY/

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Chinese inflation rate picks up

I read a book titled "american phoenix" recently that talks about how the US is exporting inflation to china because the yuan is pegged to the dollar...

Chinese inflation rate picks up

http://rss.cnn.com/~r/rss/money_markets/~3/XlC7Vn9GaOI/index.htm

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