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To: RetiredNow who wrote (67025)	2/10/2005 11:19:04 PM
From: Lizzie Tudor	Read Replies (1) \| Respond to of 77400

you sure the pes are back down to historical levels? I'm not sure that fed model works with rates this low. Besides we know rates are going up. The fed model has been showing undervalued for the past few years anyway as tech stocks have grinded lower for the most part (ok they are higher now than the 02 bottom but really, there has been little in the way of upwards mobility in stocks)

To: RetiredNow who wrote (67025)	2/10/2005 11:58:37 PM
From: Amy J	Read Replies (1) \| Respond to of 77400

If the Fed is bothered by what they noted as an increase in transportation costs (trucking & trains) that may impact grocery prices, wouldn't be surprised to see them increase interest rates 25 bp or 50bp. Since PEs don't usually expand in an interest rate rising environment, could mean more contraction of PEs. The 90s were special - rates were decreasing. Regards, Amy J

To: RetiredNow who wrote (67025)	2/11/2005 8:11:08 AM
From: GVTucker	Read Replies (3) \| Respond to of 77400

The PEs are back down to close to historical means and the Fed's famous stock valuation by comparing the inverse of 10 year rates shows that stocks are something like 33% undervalued. While I'd agree that the Fed model shows stocks sharply undervalued, PE ratios are still in the top decile historically.

To: RetiredNow who wrote (67025)	2/11/2005 8:18:35 AM
From: Dave	Read Replies (1) \| Respond to of 77400

Hey mindmeld, I think there are two schools of thought regarding the market in general. The "Bull" school of thought is that during the low rate environment, companies were able to restructure their balance sheet (re-fi high interest debt with low interest debt), cut some bodies to increase efficiency. One thing that one pundit has noted is that CapEx is still low and if (or when) companies start to make these investments in infrastructure, one could see additional earnings acceleration. The increase in CapEx could also increase productivity which will help keep inflation in check. On the other hand, the "Bear" case is that there is way too much debt in our economy at the gov't, corporate, and individual level. Debt has been fueling our growth and there are increased concerns that the consumer may be "tapped out". Moreover, while corporate profit margins are at or near their highs, this is a "bearish" signal and that profit margins will mean revert. While several managers on a "betting" on a decline, several managers are complaining that there is a lack of investment opportunities in the market since valuations aren't "cheap" based upon their DCF models. That said, I've read that many believe that Large Cap growth looks cheap on a "relative" basis. Since everyone is a "Value Investor" these days (Value defined as low P/B ratios), Large Cap Growth when compared to Value looks cheap as their argument goes. Dave