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Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (47857)	1/24/2009 12:38:13 PM
From: fedhead	Read Replies (1) \| Respond to of 57684

I am not saying this will happen in 2009. The average secular bear market in the US has lasted 16 years and has ended when valuations were at single digit PEs and yields above 6 to 7 %. So assuming this secular bear started in 2000 , I expect the lows to be hit between now an 2016 maybe longer if the govt intervention keeps postponing the recovery. if we look at historical bear market trough valuations Dow 1500 shouldn't come as a surprise. I am sure we will have the usual intermediate bear market rallies as the market discounts tepid economic recoveries. I expect the economy to keep sliding in and out of recessions for the forceable future as the economy works out the debt overhang. I also thing we would recover a lot sooner if the govt stayed out of the way and not prop up insolvent institutions thus zombifying them but thats not going to happen hence my bleak outlook. Anindo

To: Lizzie Tudor who wrote (47857)	1/24/2009 6:00:11 PM
From: Rock_nj	Read Replies (2) \| Respond to of 57684

Wouldn't that 80% to 90% haircut be measured from the peak of the Dow and Nasdaq in the fall of 2007? We are already down 40% to 50% from the peaks of both averages a couple of years ago, so my interpretation is that he's saying we could drop another 40% or so from these levels, which is not unthinkable. Recently, the Nasdaq fell 75%+ from the peak in 2000 to the bottom in 2002. The Dow fell 90% during the Great Depression of the 1930s. It is true that stocks have traded well above their long term (like century long) P/E averages in recent decades. If the S&P 500 had remained on its past course from the early 20th century, it would be around 700 to 750 right now. I think the difference that some analysts don't account for is that now a lot more people have their money in the stock market than they did in the early 20th century. It changes in the 1980s and continues today, which puts upward pressure on stocks. Therefore, is it unreasonable to expect higher P/E levels today and therefore higher averages than the long term trend would indicate?