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I was just trying to give Gross a fair shake based on historical data, but with SPX at 800 I'm not looking for further drops to allocate capital. I'm more like Buffett's "oversexed man in a whorehouse".

Starting points for historical analyses are so important (even 100 years worth). Going back and re-reading Graham, I'm reminded that in the 30's and 40's "you could buy the present at a discount and get the future for free." IMO, it would take an unprecedented liquidity failure for that to happen again.

I think there was a lot of fluff in the recent $50 earnings of SPX, so I'm uncertain about $45 for 2003. But there are certainly lots of individual companies that seem dirt cheap right now. And with volatility so high, I'm tempted to use short puts to add to positions in MRK, SWY, SGP, and maybe GMT, PEP & CUM.

I'm a little hesitant to rely too heavily on the fed model to justify stocks being cheap (i.e., historically low bond yields), because you know the problem with ratio variables. It isn't always what's happening in the numerator.

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