Not All Dow 10,000s are Created Equal

According to Jim Lim of the New York Times, the Dow now is much cheaper in 2009 than in 1999 due to P/E dropping. What he doesn't mention is the paper money printing that's devalued stocks even further.

“Market valuations are another consideration. By almost every measure, stocks are far cheaper at Dow 10,000 today than at Dow 10,000 in March 1999.

Back then, the price-to-earnings ratio for domestic stocks stood at a very high 41.4. That’s based on 10-year average earnings, a conservative measure that smoothes out short-term swings in corporate profits. Since then, using the same measure, the market’s P/E has fallen to 18.9. While that’s not necessarily a screaming bargain — the market’s long-term average is closer to 16 — stocks are trading at a discount of more than 50 percent to their 1999 prices.” NYT