Will the stock market stop rallying at fair value, or go into a bubble?

crgarcia · May 15, 2008

Fair value to me is 3 to 5 % higher for the whole 2008.

nazzdack · May 16, 2008

On a decade-by-decade basis, the years ending in 8, 9 & 0 tend to be the most bullish. You may want to revise higher.

makloda · May 16, 2008

Fair value lies in the eye of the beholder. If something is more expensive than what I consider fair value doesn't in turn mean it is in a pricing bubble that is bound to pop.

orange_trad · May 16, 2008

LOL! Fair value? The DJIA at a 70+ P/E? And you guys contemplate a few percent here and there? This is a bubble in equities and the only question is can it be sustained until corporate earnings rise back up to a level where these prices will be in the vicinity of sane.

makloda · May 16, 2008

Quote from orange_trad:
This is a bubble in equities

Equities are in a bubble? Time to put all your money into bonds, they're totally undervalued!

crgarcia · May 20, 2008

Quote from orange_trad:

LOL! Fair value? The DJIA at a 70+ P/E? And you guys contemplate a few percent here and there? This is a bubble in equities and the only question is can it be sustained until corporate earnings rise back up to a level where these prices will be in the vicinity of sane.

Dow PE at 70+?
Where you get this info?
From Hugo Chavez?

http://finance.yahoo.com/q?s=DIA
Clearly shows PE at 12.2

otcstockfund · May 20, 2008

Dow Industrial 87.34
Nasdaq Composite 31.50
Russell 2000 66.20
S&P 500 23.80

http://online.wsj.com/mdc/public/page/2_3021-peyield.html?mod=topnav_2_3000

LT701 · May 20, 2008

ever hear of hiroshima?

http://www.youtube.com/watch?v=y7j-F0sgD_Y

Landis82 · May 20, 2008

Quote from crgarcia:

Dow PE at 70+?
Where you get this info?
From Hugo Chavez?

http://finance.yahoo.com/q?s=DIA
Clearly shows PE at 12.2

I'm sorry, but this is why ET has become so ridiculously absurd. Why would anyone want to use a trailing P/E on the market?

Ever heard of P/E compression?

The market is a huge discount "machine".
A "trailing" P/E number ( as you have posted ) is totally worthless.

orange_trad · May 20, 2008

Both are strong arguments. First, yes, the only alternative to American equities are American bonds. And second, yes, showing the Diamond trust numbers is totally relevant. However, earnings for the DJIA fell from $226.02 to $185.64. Now you have to have a phd in math for the next step: derive from above number the price/earnings ratio for the DJIA. I'll let you do it. And also, I have to admit: merely mentioning the name Hugo Chavez pushes me into a foaming shiver. Hydrophobia or something...