Kass: S&P Yield Eclipses 10-Year Yield

This blog post originally appeared on RealMoney Silver on Nov. 19 at 7:45 a.m. EST.

Yesterday afternoon, my friend/buddy/pal, Barron's Randall Forsyth, called to ask me what was the meaning behind the dividend yield of the S&P 500 (3.57%) having had eclipsed the yield on the 10-year U.S. Treasury note (3.54%) for the first time in 50 years.

Many who were interviewed by Randy suggested that the phenomenon signaled a stock market bottom. By contrast, I viewed the significance of the yield differential (or lack thereof) as more of an indication that the forces of economic contraction will be greater than the forces of economic expansion over the next several years.

"It's a general sign of profound risk aversion (and a flight to quality)," adds Douglas A. Kass, who heads Seabreeze Partners Management. "And in a broad sense, the absence of a differential [between the S&P 500 and Treasury 10-year yield] reflects a growing sense that corporate profit growth will be limited over the next couple of years," he says. ...