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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: LLCF who wrote (90768)4/6/2001 2:03:17 AM
From: GraceZ  Read Replies (1) of 436258
 
Then what's your point... buy anyway because it might diverge more???

My point was that the market doesn't have a normal valuation...period. Valuations are always in the context of the larger market. What is considered a reasonable PE in one time period is completely unreasonable in another. You could have been a low PE investor throughout the later half of the 1990's and you'd have had completely sub-par investing results. Now they matter again. Pick a high PE stock and short it. That works until it stops working. According to you and most everyone else on this thread it'll keep working until PE's are below the historic mean. You may very well be right. This has happened in previous bears, so it'll work again. But what if, in the larger context, what we saw in the NASDAQ in the last year was a speculative correction rather than the start of a secular bear market?
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