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To: Lucretius who started this subject4/5/2001 9:07:00 PM
From: junnie  Read Replies (3) of 436258
 
Where does the S&P 500 P/E go???

Right now it's around 22, historically it's averaged 16. 22/16 = 1.38 means generally that the market is 38% overpriced.

Or does it?

The thinking amongst the market for the past 10 years has been that we have entered a new era of valuations. That for the long-term we will continue to see higher valuations than we have in the past. Why? Because in the nineties we saw something new. We saw Joe and Mary Smith putting their retirement money into the market. At that moment the market ceased to be something for the more privileged and became something for the mainstream. Money moved into mutual funds at record rates, and money will continue to move into the markets at above historic rates. And for anyone who understands the law of supply and demand they realize that if Joe and Mary Smith continue to put their retirement money into the stock market then what we have here is more demand than we have historically seen and therefore higher P/E's.
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