Cecil

9 Reasons Why We Are Close to, If Not Past, the Bottom

I too have been involved in the capital markets for over 30 years, and I have learned quite a lot about how things work. Putting all of my favorite indicators together, I come up with a scenario where the upside for stocks is significantly better than the downside. I agree with most- not all- of the points you have made. In my view, we are reasonably close to a floor in valuations, but still have some downside left as the market continues to be rocked by emotional reactions to what's going on in the financial system.

I also think that it's entirely possible for the S & P to rally as much as 25-30% in the next 6 to 12 months. This would not be as bullish as it appears on the surface. A 25% rally from here would only take the index to 1500, at which point it could peter out without making a new high. If this were to happen, it would fit with my view of the economy being mired in low growth/mild recession for longer than most expect.

The key, of course, is how to play such a robust rally in a very weak economy. And the question that is on almost every investors mind right now is- which investments should I avoid today? The fear of meltdown and a return to the great depression is palpable. It's primarily because of the pervasiveness of this fear that I end up agreeing with you- we must be near the bottom.

9 Reasons Why We Are Close to, If Not Past, the Bottom

Rich Bernstein, in the current Barron's, calculates the trailing 12 month P/E on the market to be 16 or 17. Add this to earnings estimates for 09 being too high, and I must ask you- how are valuations low?