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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: pater tenebrarum who wrote (125843)	9/26/2001 3:43:36 PM
From: Wyätt Gwyön	Read Replies (2) of 436258

isn't it amazing how everybody's recoing 100% long equities? Burton Malkiel is but the latest to throw his hat in the ring. he's gotta be right, right? i mean, he's an Ivy League professor and all. just because he wrote that stock prices aren't predictable doesn't mean he can't justify a PE 50% higher than the long-term average>> Don't Sell Out It's a buyer's market in equities. By Burton G. Malkiel Mr. Malkiel, a professor of economics at Princeton, is author of "A Random Walk Down Wall Street" (W.W. Norton, 7th edition, 2000). interactive.wsj.com I have analyzed monthly data spanning the past 35 years. It shows the actual P/E for the Standard & Poor's 500 index and the P/E that would be predicted based on the past 12 months' change in the Consumer Price Index. The P/Es bear a close relationship to bond yields and the rate of inflation. The normal relationship today, based on bond yields and inflation, is for the S&P to sell at about 22, not 15. Bond yields are low and inflation is well contained, so it is perfectly appropriate for the S&P to sell at a level above its long-run average. The market today appears to be fairly valued.

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