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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Bruce Brown who wrote (46391)9/10/2001 12:38:37 PM
From: RobertHChaney  Read Replies (2) of 54805
 
Bruce - Thanks for fascinating "MarketPlayer.QuantView analysis link.

It is a very interesting analysis and demonstrates why PE and other key ratios cannot be viewed historically on a stand-alone basis. Part of Buffett's teachings in the past have discussed the importance of the constant struggle for investor's funds between stocks and bonds.

IMHO, most tech stocks are still overvalued and I have yet to pull the trigger on anything. However, that could change before too long. A concern I have is that the trigger decision will be very difficult when it arrives, because things will look horrible and the "mega-bear" cases will become very believable. However, if you believe the theory behind the QuantView analysis, and consider the historically low (and getting lower) inflation and interest rate environment we are currently in, it becomes difficult to believe the mega-bear scenario of a possible 7-8 PE for the S&P 500. The last times those multiples were reached was 1973-74 and 81-82 (as shown in the chart on post #46383 that Chaz was kind enough to provide us with). Clearly the inflation and interest rate scenarios, as well as other key factors seen in those recessions, were dramatically different than what we have today. So, this recession could reasonably be expected to bottom-out at a higher multiple level as the analysis suggests. Also, the Fed has more powerful weapons at its disposal to ultimately bring this one to an end than it did during those two recessions. But, I would never rule out the possibility of other major factors like massive debt defaults, etc. causing the mega-bear scenario to happen.

Thanks again for the thought provoking link.

Robert H. Chaney
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