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Strategies & Market Trends : MDA - Market Direction Analysis

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Nov 7 4:00 PM EST

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To: Michael Watkins who wrote (46435)	4/15/2000 3:37:00 AM
From: Jacob Snyder	Read Replies (2) of 99985

re: Asset inflation is the issue; irrational pricing is the issue Exactly correct. Over the (very) long-term, the S&P 500 stays within a PE range of 10-20, using trailing earnings. Earlier this year, it hit an all-time high PE of 30. If the PE had been, say, 15, when inflation nudged up a bit, you would see a little bit of PE compression. But from a height of 30, there is lots of room for a big fall in the PE. And that PE of 30 was an average of a few stocks with PEs of 50-150, and a lot of stocks with PEs of 10-30. But, back in January, it was very hard to get people investing in Ebay to talk about PE ratios.

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