Are Stocks The Bargain You Think?

Here is a short article that compares the bullish and bearish opinions on current stock valuations. Click here to skip the intro and read article on differing stock opinions

Article Introduction (Via New York Times)

Some of the country’s most famous investors, including Warren Buffett and John Bogle, have started to make the case that it’s time to dive back into the stock market. They are usually careful to add that they don’t know what stocks will do in the short term. Yet their basic message is clear enough: stocks are now cheap, irrational fears have been driving the market down lately, and people who buy today will be glad that they did.

After a day like Tuesday, when the market rose 11 percent, it’s easy to see the merits of the argument. But there is another argument that deserves more attention than it has gotten so far. It’s the bearish argument that is based neither on fears that the country may be sliding into another depression nor on gut-level worries about the unknown. It is based on numbers and history, and it has at least as much claim on reason as the bullish argument does.

Article Excerpts (Via New York Times)

“Stocks are truly cheap only relative to their values over the last 20 years, a period that will go down as one of the great bubbles in history.”

“As stocks were soaring on Tuesday afternoon, I called James Melcher to hear a dose of fact-based bearishness. Mr. Melcher is president of Balestra Capital, a hedge fund in New York, who wrote an essay for his clients two years ago that predicted the broad outlines of the financial crisis (and then arranged Balestra’s portfolio accordingly). Like the bulls, he said that no one could know what the market would do in the short term. “But to think stocks are cheap now,” he added, “is not rational.”

Click here to read full article on Arguments for and Against Cheap Stocks