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Pastimes : The Philosophical Porch

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To: $Mogul who wrote (4231)	7/15/2009 7:53:17 PM
From: Rarebird	Read Replies (1) of 26251

Markets take their sweet time making up their minds about what's right. Anyone who lived through the early Eighties can testify to that. Stocks were incredibly cheap after an 18-year period of no gains (negative gains when inflation is factored in). But, very few thought that stocks could do anything on the upside at the time. PE Ratios of 6 or below were the norm for relatively healthy companies. Today, this market is inverted. PE Ratios are very high and based upon the history of the last two decades, they might seem justified. Few think that PE Ratios need to come back to typical bear market lows, or that market-wide earnings are permanently impaired by the bursting of the debt bubble. But, eventually that Point of Recognition is likely to make for a real watershed event in the market. The most likely time for it is next year, going into the October timeframe. Short term, markets often act irrational, viewed from a fundamental point of view. That's why I place a priority in regard to technical analysis. Longer term, markets adjust and get it right.

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