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To: Frank Pembleton who wrote (91644)	6/20/2001 9:00:17 AM
From: Frank Pembleton	Read Replies (1) \| Respond to of 95453

Still Vulnerable 06.11.01 -- Charticle - Forbes Magazine The stock market is down closer to its two-century average growth trend--but still high. Where are we now? By the S&P 500 measure, the stock market is off 16% from its peak in March 2000. But in longer perspective, calculations by Wharton professor Jeremy Siegel suggest that, counting dividends and adjusting for inflation, the market is still about 25% above its 1801-2000 average growth trend. To get back to that average trend the market would have to move sideways until 2005. That doesn't rule out the possibility of a quick zoom upward, but it makes it less likely. Still, the market is not as irrationally exuberant as last time we visited Siegel (Forbes, May 29, 2000). Then, the cumulative total-return market was 40% above trend, a level last reached in 1928. It could have moved sideways for eight years before getting back to trend. But remember, this is not a chartists' trend line, at which the market should reassuringly bounce. It's a statisticians' trend line, a method of averaging the market's annual levels. By definition the market has to go below the trend and stay there long enough to balance its activity above. At historic bottoms (1932, 1974, 1981) the market has fallen as much as 43% below trend-about 5200 on the Dow today. Siegel is more optimistic. His guess is that improvements in economic management and market liquidity mean that the stocks could stabilize and even appreciate-albeit modestly-for the next several years.