Huh? This looks like a pretty crappy strategy to me (as I would expect of any market-timing strategy with such a simple ruleset). You buy 10-year treasuries instead of stocks in 1970, so you can't take advantage of the 2.5 year stock run-up before the 1973 crash? Then, 10-year treasury yield beat earnings yield every single goddamn year from 1981 through 2003; someone who avoided stocks and kept buying treasuries through that period based off your advice would have wanted to kill you. So if you still think that metric is a good crash-indicator, I've got an awesome stopped clock I'd like to sell you!
Hmm, you're definitely right about that, 712% from 1981 to 2003 for SP500 (no dividend reinvestment), 1475% with dividend reinvestment, whereas with 10 year treasury, if you swapped everytime you could get a higher interest rate (in 1982, and 1995) or whenever your 10 year duration ran out (in 1992), you would end up with 1057% - that's equivalent to 400K worse if your initial investment was 100K. And this is assuming only an initial investment, not DCA, where SP500 would blow treasuries out of the water
10 Year Hold 1,000.00
1981 12.57% 12.57% 1,125.70
1982 14.59% 14.59% 1,289.94
1983 10.46% 14.59% 1,478.14
1984 11.67% 14.59% 1,693.80
1985 11.38% 14.59% 1,940.93
1986 9.19% 14.59% 2,224.11
1987 7.08% 14.59% 2,548.61
1988 8.67% 14.59% 2,920.45
1989 9.09% 14.59% 3,346.54
1990 8.21% 14.59% 3,834.80
1991 8.09% 14.59% 4,394.30
1992 7.03% 7.03% 4,703.22
1993 6.60% 7.03% 5,033.86
1994 5.75% 7.03% 5,387.74
1995 7.78% 7.78% 5,806.90
1996 5.65% 7.78% 6,258.68
1997 6.58% 7.78% 6,745.61
1998 5.54% 7.78% 7,270.41
1999 4.72% 7.78% 7,836.05
2000 6.66% 7.78% 8,445.70
2001 5.16% 7.78% 9,102.77
2002 5.04% 7.78% 9,810.97
2003 4.05% 7.78% 10,574.26
I am curious tho, if you could have gotten a 30 year treasury bond (from my quick and dirty research I did not see a 30 year offered back then) yielding 14.59% in 1982, would you have taken it?
Edit: That is actually really sloppy math, I'm assuming I can reinvest the principal at the original rate - total return is probably closer to 700% instead of 1057% - also forgot to include a growth assumption in the SP500 where there is none for treasury bonds when comparing the earnings yield for each - embarrassing!