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Politics : High Tolerance Plasticity

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To: augieboo who wrote (17948)	12/2/2002 3:02:18 PM
From: Steven C. Vartan	Read Replies (1) of 23153

Augie: The current issue of Barron's has an article by Stephen Leuthold who has been a bear for many moons who is calling for a bull market bascially on the historical ratio of S&P earnings from 1944 being a median of 16 (with 10% fudge factor on either side). He says market is now at the top end (17.6 times) or normalized S&P earnings. In the text of the article he admits that the analysts get it wrong most of the time. His thesis is that 75% of the time bears end at this zone and that the former bears ending with PE at 10 to 14 was when interest rates were very high. IMO the problem with his argument it that earnings for the S&P need to come down substantially from analysts estimates and generally the market tends to overshoot on the downside before heading back up. The fundamental issue is where the top line growth will come from? Short range companies can report profits by laying off lots of workers and taking non-recurring one time charges but at some point sales are needed to make profits. Levy in the forbes article askes the basic question of how can profits rise if no shortages? forbes.com

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