We believe that the market is now near such a level. Speculation, high valuation and economic slowdown. This cycle has repeated itself for generations.
Manias always end badly.
A low dividend yield has nearly always signaled a very expensive stock market which has tended to perform relatively poorly going forward. Corporate managements realize that peak-cycle earnings cannot be sustained, and thus pay out a smaller percentage of their earnings in dividends when they realize that earnings are near peak levels. Dividend yield doesn't matter anymore, as investors would rather have capital gains and managements are instead buying back company stock. Another important issue is that stock buybacks at high prices do not benefit common shareholders at all, and can be harmful to shareholder value. We do not expect this level of profit growth to continue, and indeed expect a decline in corporate profits in 1998.