ok jad you like numbers, if the DOW goes to 36,000 where does brkb have to go to stay even including say a 3 % yield on the dow ? thanks bud,
come on todd, make the case, how does brkb beat the spy going forward as buffett goes into his late 80s, thanks old bud. BTW, if any old buds in expertsville has opined i'll accept that too. even that popeye idiot odd lot piker.
That's the heart of this scam, to support THEIR price target the dividend yield has to FALL, dramatically.
According to last week's BARRON's the DJIA's trailing 52 week dividend per share was $353.44.
The first part of the con is to use the real yield to maturity on 30-year TIPS, which was 0.62% at yesterday's close (thanks to Ben), as the risk-free rate.
To get the real discount rate add an equity risk premium of 1.5% (the second part of the con) to the risk-free rate, and then subtract the dividend's long-term real growth rate of 1.2%, and the result is a "perfectly reasonable" yield on the DJIA of 0.92%, not the current 2.45%. If the DJIA closes today at $38,417 per share, the dividend yield, based on last week's T52W D/s, would be 0.92%.
This is just a watered down version of the nonsense they were proposing in 1999. IIRC, back then they were suggesting a P/D ratio 200, which is equivalent to a dividend yield of 0.5%. At yearend 1999, the P/D was 68. The historical (1929-2012) P/D ratio? 29.