Warren Buffett's Favorite Valuation Measure: Watch Out For Minus Two

Warren Buffett's Favorite Valuation Measure: Watch Out For Minus Two by Steve Blumenthal, Capital Management Group

[buffett]

“The three great essentials to achieve anything worthwhile are: hard work, stick-to-itiveness, and common sense.”
– Thomas Edison

A comment I frequently get is that stocks are cheap relative to bonds.  My answer is that view is short-sighted and runs head-on into the other side of the low interest rate debate – rising interest rates are not good for stock market returns.  What looks cheap today becomes not so cheap when rates rise.  The Fed’s zero interest policy (6 ½ years and counting) and QE bond buying activities have driven bond yields lower and bond prices higher (bond prices go down when interest...