Stocks vs. Bonds Allocation

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I was reading Longleaf's current semi-annual report on stock vs. bond pricing and also re-reading the Intelligent Investor.  Chapter 3 is the section that talks about this.  Once again Jason Zweig (as commentator) is clueless or oblivious to this discussion.  The more I re-read his commetary the less I think it brings to the text (obviuos ommisions and clear "efficient market" index-bias). 

 

Anyhow, according the text the comparision to earnings or FCF yield to AAA bond yield is pretty high (somewhere between 2 and 3 to 1).  When the ratio was this high in the past 1940s and 1950s, stocks outperformed bonds tremendiously.  In looking at the data from the 1960s it is incredable how low the ratio got as low as 0.72. 

 

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