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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Alastair McIntosh who wrote (23102)	5/1/2005 10:21:42 AM
From: Return to Sender	Read Replies (1) \| Respond to of 95456

You said that it was your opinion that we would see great values before a bottom was formed. Are you still of that opinion? One of the things that is truly interesting about the chart you linked is that margin debt is very high again. I hope no one here is overly margined because the market can revalue itself without regard to P/E's based on many factors. The danger in thinking that stocks are cheap compared to 2000 is simple. The stock market bubble top was set in 2000 when nothing was cheap. If one wants to suggest that stocks are cheap then compare values to when stocks were least expensive not when they were most over valued. A look at S&P 500 Earnings compared to when stocks in the index have been historically cheap at a P/E of 10 or less suggests that the stock market could fall an awful lot further before great long term buys are found. tal.marketgauge.com Time Frame: Long Category: Fundamental Description The most basic measure of stock market value is price relative to the latest 12 months' earnings - the P/E ratio. In bear markets, investors terrified by bad news can drive the S&P 500 P/E ratio to under 10. In the 1974 bear market, this ratio dropped to 8 with many securities trading with even lower multiples. In bull markets, extreme optimism can drive the market's P/E to 25. In the 1995 bull market, many technology stocks were valued at over 50 times their prior 12 months' earnings, while the ratio for the S&P 500 fluctuated between 16 and 20. Calculation & Significant Levels S&P 500 Price/Earnings Ratio: Calculated by dividing the earnings over the latest 12 months' of the S&P 500 Index into the cash price of the index. A market P/E of 18 or higher is usually considered a sign of overvaluation. When the S&P 500 P/E drops below 10 the market is historically undervalued. Formula: (S&P 500 cash index price) ---------------------------------------- (S&P 500 index prior 12 months' earnings) Gauge Elements: Magnitude Updated: Weekly (as of Friday close) Strategy It is important to consider where the economy is in the business cycle before interpreting the market's P/E. Bull markets are often born out of recessions when earnings are depressed. Therefore, in the early stages of a bull market this ratio can exceed 18 as investors anticipate increasing earnings. However, a market P/E over 18 in the later stages of an economic expansion is a warning of overvaluation. When this ratio dropped below 12, the long term investor has found good buying opportunities.