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current p/e ratio for S&P Comp. is about 22 and historically it may
drop below 10. see attached. source:
http://www.econ.yale.edu/~shiller/data.htm
Best regards,
Alex mailto:alex_bell@xxxxxxx
Monday, January 13, 2003, 2:19:53 AM, you wrote:
B> Let's assume the drop is halfway over for the spx cash, i.e. 600 points from 1500 to 900. That means another 600 points down to 300, or maybe 450 on the conservative side if it only drops 50%
B> from current levels per Norman's PE calculations. Strangely enough I have some software that is projecting 301.65 on the cash in 34 months after a high in 3 months. On the weekly it is 13 weeks
B> to a high and 38 weeks to a low. Just in the FWIW category since it is all geometry bound to be distorted by politics and economics. Code is protected so I can't answer how it does the
B> calculations. Note that there is no astrology involved in Norms calcs this time, but its got me wondering what his astro calcs would say about the timing and price projections on another 50% down
B> move.
B> bobr
B> ----- Original Message -----
B> From: Norman Winski
B> To: realtraders@xxxxxxxxxxxxxxx
B> Sent: Sunday, January 12, 2003 2:37 PM
B> Subject: Re: [RT] Commodities
B> JC,
B> Thanks for the recognition. However, I must differ with you on your
B> evaluaton of the
B> current vs. historical US stock market PE ratio. Until the previous mania
B> began in the 1980s, most major bull markets topped with the PE between
B> 18-22. It is my understanding that the S&P 500 currently is at a PE near
B> 30.Most major bear markets have ended with the PE in single digits.
B> Obviously, for the US stock market to follow it previous 200 year pattern,
B> earnings would have to
B> dramatically improve by at least 100% or the market would have to drop 50%
B> to consider this market
B> anywhere near its historical mean of fair value. I recommend studying the
B> 1873 - 1896 period in US stock market and economic history for a clue as to
B> what we may expect. This period was a 23 year period of a gradual bear
B> market with many intervening boomlets. One of the hightlights of this
B> period was the tremendous volatility and bankrupticies of the rails. One
B> can probably translate the
B> rails of 1873 - 1896 to the current day internet, telecommunications, and
B> perhaps the airline industries, which have all fell victim to deflationary
B> factors within their industry, just as what happened to the rails during the
B> 1873 - 1896 period.
B> Longer term, one should keep in mind it usually takes decades for a bubble
B> to unravel. Gold topped in 1869 and bottomed in 1932. Soybeans topped in
B> 1973 and may have bottomed in 1999. Gold topped again in 1980 and may have
B> bottomed in 2002. DJIA topped in 1929, bottomed in 1932 (the exception due
B> to severe price crash) but didn't recover to 1929 prices for 25 years.
B> Regards,
B> Norman
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