Sandcastles in the Sky

The other conversation of interest around Chez Melvin this past weekend -- in addition to growth-vs.-value debate I discussed Monday -- was the current level of the stock market. I don't try to predict market direction, as I have found this activity to be hazardous to my wealth. However, I do enjoy the debate. It also makes sense to pay some attention to rising risk levels, as identified by a lack of safe and cheap stocks. Many folks try to discern whether the stock market is cheap or rich, based on valuation, and then invest accordingly.

This past weekend, one such individual made the bold statement that the stock market was very cheap, and that it should be bought with great abandon. When challenged by others in the conversation, he told the group that the stock market was well below historical norms, based on forward earnings estimates, and that it could appreciate by more than 20%.In my usual kindly fashion I stated that this was one of the more foolish things I have ever heard, and a dangerous form of analysis....633 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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