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Strategies & Market Trends : John Pitera's Market Laboratory

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To: John Pitera who wrote (4413)8/22/2001 2:07:25 PM
From: Wayners  Read Replies (1) of 33421
 
I would suggest that when profits are depressed, that when the economy turns that profit growth will greatly exceed 4% until the norm is reached. P/E ratios in the 1930s were still quite high at the bottom, not because prices were so high but rather because earnings were so low below the mean. Profits were quickly depressed by 20% and at some point will quickly rebound to the mean and at that point slow back down to 4%, however prices will rise substantially when the inflection point is reached.
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