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To: Tom D who wrote (60737)	8/6/2002 9:29:08 PM
From: Road Walker	Read Replies (1) \| Respond to of 77397

TD, re: But from a historical context, the trailing P/E ratio on the S&P 500 is about twice what it should be at this point in recovery from a recession (should be about 12 or 13). Interest rates. JF

To: Tom D who wrote (60737)	8/6/2002 10:36:41 PM
From: Gottfried	Read Replies (2) \| Respond to of 77397

Tom, Forbes columnist Ken Fisher has a different view... [snip] >many cite the market's high P/E, fretting further that it is higher now than in early 2000. All true--and normal. The market's P/E usually is higher at a bear market bottom than its prior peak because as a rule earnings disappear faster than stock prices. Counterintuitive, but history shows there is simply nothing about P/E levels, cut any way you want, to help predict market tops or bottoms, or market levels several years out. That we believe otherwise is mythology. If you want more on this, see my Fall 2000 Journal of Portfolio Management article (co-written with Meir Statman), "Cognitive Errors in Market Forecasts." Nor does finance theory suggest the P/Es should be predictive. Theory would have you flip it on its head, as an E/P, the earnings yield, and compare that with interest rates. Hereto, nothing much is revealed. For example, the E/P divided by the 90-day T bill rate is boringly in the middle of its historic range. P/Es often skyrocket around bottoms and thereafter because of all the writedowns. Correctly calculated, the market's highest P/Es ever were in 1920, 1932 and 1982, three of the five best times to buy in the last century.< [snip] The whole article Message 17839777 Gottfried

To: Tom D who wrote (60737)	8/7/2002 7:45:15 AM
From: RetiredNow	Read Replies (1) \| Respond to of 77397

Hey Tom, not sure about your assertion that the market is overvalued. Many reports say that the historical SP500 avg PE has been around 20. If that's the case, then we are not undervalued at all. In addition, there is another way of measuring value. I think it's something like the inverse of 30 year bond yields or something like that. I'll root around and see if I can find the article, but many economists thing we are undervalued based on historical means. Also, I do believe that the market has priced in future terrorist actions, double dips and other negative factors. Right now, confidence is just as bad to the downside as it was good when we were in the bubble. The rule of them when thinking about whether something is priced into the market is whether or not you are thinking about it. If you are, then that same knowledge is out in the market, which means it's priced in. So if you are worried about terrorist actions, then so is the market. Anyway, I'm about 70% stocks, 15% bonds, 10% money market funds, and 5% cash. Throughout Sept and Oct, I will be moving my cash into stocks. Plus, I'm continuing to invest my monthly automatic account builder plan and my biweekly contributions into my 401K, into primarily stocks. I doubt we're going to get a rocket recovery, but I think we are entering a period of normal growth again. Growth of any kind means that stocks will outperform bonds, especially in a period of rising interest rates. Good luck!