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Strategies & Market Trends : Ask DrBob

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From: shoreco	9/26/2008 7:20:11 AM
	of 100058

Long term thoughts... I did a DD on the SnP500... Fair value (my own creation of a 7% annual return)... 50 years 1958 SnP500 was trading around 45ish Fair value top of the range = 1440ish 20 years 1988 Snp500 was trading around 260ish (under valued by 100pts) Fair value bottom of the range = 1040ish So, what do we see from these numbers? I'll tell you what I see... No matter what the news, no matter what the hype, no matter who blows up or who moon rockets... The fair value trading area of the SnP500 today based on "time" is between 1440ish and 1040ish... Now look at the lows from 1998 and 2001... They fall exactly on my lower fair value line... The highs of 2000 are dead on my top range fair value, but the 2007 highs went a touch higher (thats OK)... So folks relax, this is a normal correction in a process known as "the rinse, lather, repeat cycle of life"... In 2018 the fair value range will be between...2880ish and 2080ish (double todays current levels)... EOM Shoreco PS Some will argue there is no inflation adjustments in these numbers... Here's my answer for them... Use a 5% annual return instead...huge difference...

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