No. of Recommendations: 1
I am sure you do, but some people here may not. I just found it interesting that a day or so after you mentioned your "believer" points, that one of them looks to be strengthing.

Since you are sticking to this valuation of the stock market, I will go with you on it a little further before I log-off for the day. You are right on the Historical norm and the difference between that norm and where we are today. I also agree that this definitly is something of importance. However, I wouldn't put all my energy into those ratios. It is an important part, but there is more to the valuation of a company than P/E ratios. I wish it were that easy.

As I stated earlier, I do think that overall valuations are high. However, just like any shock to the stock market, the pendulum tends to swing back the other way for a while. If we had truely gone all the way back to an average P/E of 15 from the bubble, our economy would be in a whole lot more trouble than it is now.

Another aspect at "a bottom" (which I am not calling, as I am not all-knowing), is that P/E's usually get relatively high. The reasons is that earnings are just starting their rise. Now currently, have we gone too fast back from the bottom, I don't know. However, a lot of financial strategists also use retracement models to help them try and guess the general market, or a particular stocks, next move. One of the publications that I read uses Fibonacci retracement levels, 23.6%, 38.2%, 50%, 61.8% and 100%, to help them make decisions in their market strategy. Others use less detailed 33% or 50% rules. Most stocks and markets tend to support or resist at these levels. Right now we are reaching the 23.6% level in the NASDAQ and are nearing the 38.2% level in the S&P from the big pop in 2000. I would expect to start to see some resistance here.

So yes, I do think valuations are high. I haven't bought anything since March. However, I also think that if the economy rebounds enough, we may not seen the big bear that everyone fears come back, but instead some consolidation until the fundies pick back up.

Anyway, as always, I enjoyed the debate. I will return tomorrow if you wish to continue this conversation.
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