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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (36724)	9/7/2005 11:58:43 PM
From: Chispas	Respond to of 116555

Richard Russell had me 'scared' there for a moment ... Then I read, "So his advice remains unchanged for investors, as opposed to speculators: Stay primarily in cash." <G>

To: mishedlo who wrote (36724)	9/8/2005 10:52:28 AM
From: SouthFloridaGuy	Read Replies (2) \| Respond to of 116555

I have to say I agree with Russell, Mish. The market has basically been in a trading range to slightly down if you exclude oil stocks. Earnings yield on the market is now approximately 6% which makes the market slightly under-valued when compared to long bond yields of approximately 4.5%. Compared to 2000 earnings have increased 20% or more (this year's estimate for earnrings is approximately $80/share verus approx $60/share in 2000), bond yields are 300 bp lower and earnings growth remains at 15% for at least the next 1 year if not longer, not to mention the market is 22% lower. Fair value for the S&P500 is at least 1400, IMO, we could see a huge move over the next 1 year. The deflation scenario will probably have to be to be put to the side for the moment unless we have some type of systemic event which takes stocks from under-valued to outright cheap. Even then, current valuation versus bond yields puts a floor on how low we go unless we have some type of massive deflationary event, Prechter style, which I think even the most credible bearish pundits are not saying will happen. Fed gets a B+ for post-bubble management.