THUMBS DOWN: A Sobering View

Stocks are cheap now after 3 consecutiveyears of market losses. That'sone of the main arguments behindforecasts of a new bull market. Butsome gloomy prophets say it isn't so.Price/earnings ratios on S&P 500 companies,based on forward earnings,are up around 30, far higher than thehistoric average in the midteens. Toget back in sync with that average,stock prices must fall or earnings mustincrease at a 76% clip over the nextyear. Another downer: The marketvalue of all publicly traded companiesstands at 100% of the nation's grossdomestic product. Over the past 8decades, that ratio has mainly been inthe 40% to 80% range, with 2notable exceptions—it hit 109% backin 1929 and stood at 190% when themarket reached its high in 2000.