KANGAS: Give us a down side estimate of where you think the Dow could go.
COCHRANE: Well, a year out, some time within the fourth quarter of '02, I would
say that the Dow could be around the 5,500 level, the S&P 500 around 500, 600
and the NASDAQ Composite somewhere in the 600 to 800 level. If we look at
historical valuations with respect to P/E multiples on the S&P 500, we're trading
right now somewhere, if you believe the numbers, somewhere around 36, 37, and
an overvaluation is 20. And that puts the S&P around 750. A fair value would be
at 550 at 15 P/E and an under value would be at 10, and that would be right
around 400 on the S&P 500. so right now obviously trading at the 1,100 and
change level, the S&P 500 is very, very over valued, as is the Dow Industrials and
the NASDAQ.
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