Robert H. Heath

Reports of Equities' Death Are Greatly Exaggerated

There is a "huge flaw in the logic" of ANY argument that attempts to assess the cheap (or expensive) nature of stocks based solely on how far they have fallen (or risen) in the recent past.

The presumption, for example, that stocks are cheap at current levels because they've fallen so far so fast requires one to simultaneously hold the views that the market is inefficient now, but was efficient at some time in the recent past. Said differently, the argument is equivalent to saying "..the market had it right when the S&P was at 1300, but at 800 the market is acting irrationally."

The NYT article makes a valid point when it observes that many equities are essentially flat from 1998 through 2008. If the author had wanted to pile on, he might have mentioned that the Nikkei will have to rise around 30,000 points or 375% in 2009 to finish 2009 flat with its peak 20 years ago.