Stock Attack II - A Complete Analysis Message Board

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Strategies & Market Trends : Stock Attack II - A Complete Analysis

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To: Lee Lichterman III who wrote (24361)	11/18/2001 12:01:03 PM
From: thestockrider	Read Replies (2) of 52237

Lee, here's something from Bill Gross' commentary at www.pimco.com on PEs versus inflation. pimco.com "All you really need to know about whether stock prices are now too high, too low, or just about right, is to surmise from Chart 2 that PEs are just about where they should be in a 1-2% inflationary world. PEs are fairly valued, but importantly – not going much higher. They can’t, you see. Inflation isn’t going much lower than zero and if it does, we enter a deflationary spin zone which knocks earnings for a giant negative loop. So rest content that PEs of 25-30x are close to max bull market PEs. Granted, they’ve been much higher in Japan, but those are bear market PEs reflecting an economy in destructive deflation." My examination of the graph indicated that Earnings/Price usually turn up before inflation turns up. Don't know whether that because earnings go up, or prices go down. Inflation has been in a downtrend for the last 18 years. -thestockrider

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