Bonds Remind Us That Stock Valuation Still Matters

Most investors are looking for a cash-on-cash return. They put their hard-earned cash into a stock and want a shot at receiving a decent-sized earnings stream or dividend stream within some reasonable amount of time. This cash-on-cash return framework reminds us of the importance of default-free government debt yields that are available. If these yields spike higher, then the willingness to hold the most speculative, lowest cash-on-cash return stocks can fall sharply.

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Dan Amoss

Dan Amoss, CFA, tracks aggressive accounting and other red flags that markets miss. He’s a student of the Austrian School of economics and Daily Reckoning fan since 2000. Agora Financial relies on Dan for macro market commentary as well as profitable plays like his 2008 call to readers to buy Lehman Bros. puts, which...

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