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« Avoiding the Time Frame Mistake | Main | Market Higher in 2007 Series: Handling Adversity »

May 09, 2007



Marc - Thanks for your observation. That the market has moved higher does not necessarily imply irrational exuberance. It all depends on the underlying value. Check out the following:

My own experience is that markets often go up, up up while fighting plenty of worries.

Thanks again,



I keep hearing the comments about the bearish sentiment being too high and thus indicative that the market has further to rise. Does it make any sense to quote bearish sentiment (from any sources) when the true measure of sentiment is the market itself, which is obviously going up up up? This tells me that the real sentiment is almost obscenely bullish.


Yes, the stocks can go another 20% up this year. They can also go down 20% with no less probability (remember, we are living in the biggest credit bubble since 1929).


Ward and Nova -- Thanks for your helpful comments. The Shiller analysis is interesting, since his long-term look at forward earnings uses a rather awkward estimate for historical analysis.

I read all of the Mauldin articles. As you might well conclude from prior material, I see P/E without looking at interest rates as a weak method. More on that later.

Thanks again,


Nova Law

Your post is an excellent example of truly contrarian thinking. Do you believe P/E ratios drive the forward returns of the stock market, as the Mauldin/Easterling crowd proclaims?


Robert Shiller spoke at CFA conf last week and among his many slides was a chart of real earnings and real price since '85. Headline reads "why did the stock market rebound so strongly since '03" but the chart very clearly shows how the big move in earnings from '92 to '00 was follwed by an even bigger gain in price - the bubble. This time around eps have run much farther and much faster and price has moved about half as much. A bullish chart from a famous bear.

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