Abby Joseph Cohen was just on Bloomberg TV. She believes the stock market is cheap and will go higher, she has been right a few times so why not now?
She cited the dividend discount model (DDM) as a part of her reasoning. Beware of this type of indicator! It can make stocks look very cheap, only to get much cheaper. Ditto on stocks being overvalued. This swings versus this indicator are quite wide.
DDM does tell you if stocks are cheap or overvalued but does not offer much predictive value as to when the inefficiency will correct itself.
Proud Member Of
Random Roger
© 2009 | Gadget Theme Blogger Template
Original WPtheme By Blogger Template | Converted By Gadget Lover
| Distributed by eFree Blogger Help
Original WPtheme By Blogger Template | Converted By Gadget Lover
| Distributed by eFree Blogger Help
4 comments:
Why not now, indeed. Listen to Abby, the perma-bull, at your own risk. She said things looked cheap in April 2000 and all the way down. Discount model or not, she never sees the downside, ever.
Does the DDM model use a bond rate for discounting? Because models that use a bond rate have one basic flaw. They predict whether the market is overvalued or undervalued RELATIVE to an interest rate. No reason the correction can't come because of the interest rate adjusting upwards.
both comments are exactly right and the point i'm tryimng to make.
Abby has been right? When? Heck she was the greatest fade trade for the last 2 years and only up until her last appearence did that trade not work.
http://www.billcara.com/archives/2005/07/fortune_telling.html
Post a Comment