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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: Lars who wrote (2546)12/21/1998 7:46:00 PM
From: MrGreenJeans  Read Replies (4) of 15132
 
Hard Question

Tonight the S and P 500 closed at 1202.84. If one is projecting earnings of $51.50 for 1999 the price earnings ratio at this moment would be 1202.84 / $51.50 = 23.36 times 1999 earnings.

If one assumes the S and P 500 will trade at a range between 23.5 and 24.5 price earnings ratio taking the higher end of this range 23.36 / 24.5 = we are 95.33% of the way to the upper end of that range at this moment.

Why would one want to be 100% fully invested in this market when we are at 95.33% of possibly the upper range the S and P will see in 1999? Or maybe a better question would be why would one want to be fully invested in the first half of 1999 presumably when investors are not looking at year 2000 projected earnings this early in the year? I need some convincing. I am not sure I will be convinced.

Assuming everything goes well in 1999 we have probably already achieved levels to be seen in 1999, arguably slightly below, at this moment. The market projections for 1999 seem already achieved if forecasts are correct. If projections are wrong we go lower. If projections are understated presumably we go higher but probably not until the last half of 1999.

I am currently 70% in equities-30% in cash and bonds.

Any takers?
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