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JC,
Thanks for the recognition. However, I must differ with you on your
evaluaton of the
current vs. historical US stock market PE ratio. Until the previous mania
began in the 1980s, most major bull markets topped with the PE between
18-22. It is my understanding that the S&P 500 currently is at a PE near
30.Most major bear markets have ended with the PE in single digits.
Obviously, for the US stock market to follow it previous 200 year pattern,
earnings would have to
dramatically improve by at least 100% or the market would have to drop 50%
to consider this market
anywhere near its historical mean of fair value. I recommend studying the
1873 - 1896 period in US stock market and economic history for a clue as to
what we may expect. This period was a 23 year period of a gradual bear
market with many intervening boomlets. One of the hightlights of this
period was the tremendous volatility and bankrupticies of the rails. One
can probably translate the
rails of 1873 - 1896 to the current day internet, telecommunications, and
perhaps the airline industries, which have all fell victim to deflationary
factors within their industry, just as what happened to the rails during the
1873 - 1896 period.
Longer term, one should keep in mind it usually takes decades for a bubble
to unravel. Gold topped in 1869 and bottomed in 1932. Soybeans topped in
1973 and may have bottomed in 1999. Gold topped again in 1980 and may have
bottomed in 2002. DJIA topped in 1929, bottomed in 1932 (the exception due
to severe price crash) but didn't recover to 1929 prices for 25 years.
Regards,
Norman
----- Original Message -----
From: "John Cappello" <jvc689@xxxxxxx>
To: "Steve Walker" <steve@xxxxxxxxxxxxxxx>; <realtraders@xxxxxxxxxxxxxxx>
Sent: Sunday, January 12, 2003 3:12 PM
Subject: [RT] Commodities
>
> Norman has a great camp...and hit the ball a mile with his sugar,
> coffee and other picks. I just get concerned when the major rags
> start to see that light...contrarian that I can be.
>
> At the same time there are data that indicate the average market rise
> of the third term of a Presidency is around + 20%...and the PE of the
> S&P 500 is not super low, but it is nowhere near its peak.
>
> John
>
>
>
> ------------------ Reply Separator --------------------
> Originally From: "Steve Walker" <steve@xxxxxxxxxxxxxxx>
> Subject: [RT] Commodities
> Date: 01/12/2003 01:51pm
>
>
> More are joining Norman's camp. In this week's Barron's, Marc Faber
> and
> Art Samberg say the new leadership is commodities and hard assets. I
> heard it first from Norman over a year ago.
>
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