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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (16449)	2/17/2003 1:42:39 PM
From: MCsweet	Read Replies (1) \| Respond to of 78702

Darfot, You make some good arguments, but in a couple of cases perhaps you take them to the extreme. Although there may be no long-term historical correlation between yields and high PE's, I will find stocks to be much more attractive if my major alternative investment yields 3% rather than 10%. Heck, if I could earn a low-risk 10%, I might be out of the market entirely. With respect to your 1940s data (a regime with lower PEs and lower bond yields), I would guess that the stock risk premium has lowered from that time. A greater percentage of people are invested in stocks. More importantly, stock investors have access to more information more quickly, more liquidity, and smaller transactions costs than at that time, such that you could expect higher stock valuations due to decreased risks/costs in these areas. MC