Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (25) | Ignore Thread Prev | Next
Author: ubn Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 213730  
Subject: Re: 40% Overvalued Date: 10/8/2012 3:38 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 5
S&P is at least 57% overvalued

Lets go with this train of thought

1. S&P is representative of the overall market
2. Generally DOW matches S&P 500 price / value - as per Ben Graham
3. S&P is 60% overvalued
4. S&P is 1450 - so if it were to drop by 40% if would be at 870
5. Not all Dow stocks are overvalued by same amount
6. Therefore some DOW stocks are more overvalued
7. This overvaluation for these "some" DOW stocks has to be more than 60% to compensate for those that are not overvalued (probably more to account for time and the swing in the other direction)

So one should be easily be able to identify about 10 DOW stocks (out of 50) that need to drop by approx 60% to reach fair value ? If you cannot, then the S&P overvaluation logic is inaccurate and flawed.

Note: Because we are saying fair value, so you cannot account for recession and have to assume normal GDP growth (~2-3%)
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (25) | Ignore Thread Prev | Next

Announcements

Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement