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To: uu who wrote (24182)	9/24/2001 12:40:47 PM
From: sea_biscuit	Read Replies (1) \| Respond to of 25814

That assumption is based on the S&P 500 earnings being $55 next year. Right now, the reported earnings are expected to show up at $40 for this year (and this estimate is climbing down every day). So if you believe that earnings will rise by 40% next year, then the conclusions of the article are valid. If you believe that earnings will rise only 5% next year, then as of Friday's levels, the markets are about 23% overvalued. The validity of any analysis are only as good as the validity of the inputs. During the height of the mania, some people even assumed that a fraction of the aggregate will grow faster than the aggregate -- and indefinitely. We all have seen where that led us!

To: uu who wrote (24182)	9/24/2001 8:15:31 PM
From: sea_biscuit	Respond to of 25814

The following article debunks that theory: comstockfunds.com (Go to article dated 09/24/01). Among other things, it says that stocks have never traded above 22 times earnings, except during the bull-market that ended last year. There have been several times in the past when the interest rates were as low or even lower than it is now. The indicator has worked only since 1980 i.e. mostly during the last secular bull. I would be very wary of any indicator that has not been tested through at least one secular bull and one secular bear. So, if there's anything that's worked consistently over the last 35 years or longer, let me know.