Jerome Powell on Stagflation
“I don’t see the ‘stag’ or the ‘-flation’,” Fed Chairman Jerome Powell said during his Wednesday address. Powell believed inflation would be “transitory.” He believed that the economy would come [...]
QUESTION: I see all of these people calling for a major crash of 50%+. With interest rates so low and the dividends on the Dow twice that of interest rates, does anyone look at yield anymore?
PH
ANSWER: I fully agree. The yield on the Dow Jones is 2.34%, which is about comparable the 10-year rate. Back in 1983, I presented these two charts that show the earnings and book value of the Dow Jones Industrials. The majority were calling for a crash and our computer warned of a Phase Transition and a 600% rise in the Dow. I was blamed for creating the takeover boom, but it was clear that the earnings were at least 5% and the stocks were trading out of a major historical low on price v book value. So earnings do come into the mix.