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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA
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To: David Howe who wrote (15301)12/4/2002 1:18:50 PM
From: Steve Lee   of 19219
 
When you by a CD you are guarantedd to get your principal back.

When you buy stocks you are not.

That is why the "Fed model" is bogus.

Sure, stocks are less attractive when rates are high so rates hsould make some difference. But a direct calculation of earnings yields against CD/bond yields is not valid.

So, PEs may justifiably be higher than 7 at the bottom of the current bear market, but not historically high.

If you had low rates in a bull market, then historically high PEs would be expected. Not at a bear market bottom.
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