There is one little thing that the bears seem to be forgetting,
and it's the p/e ratio. Currently e/p on SP500 is a lot greater
than the 10-year interest rates, which makes stocks "cheap",
on the basis of portfolio allocation. In fact, due to increase
in earnings, e/p is currently the same as in 2002! So, no real alignment
is possible, like one that happened in 2000 or in 1987, when
that was REALLY out of whack (e/p 36% greater in 1987, 50% or
more in 2000). For stocks to go down, either
the earnings need to come down due to slowdown in the economy,
bank losses, etc., or the 10-year interest rates will need to
go up. I think there is also a small possibility of a disconnect
developing, i.e, p/e and stock prices moving up, while 10-year
interest rates move higher, until we reach 36% overvaluation
on a relative basis or something, prior to BK. They sure can
get cheaper on a relative basis as well, as they have been
cheaper historically. But that ratio is currently not really too
bearish. |
