http://www.marketwatch.com/news/yhoo/story.asp?guid={F3A13CD8-1E5D-41B6-BB30-D58D5D3D1BE2} An excellent article imo that breaks it down quickly and simply, just my style. If we are going to experience normal growth, does it mean that the P/E's will once again reflect historical expectations? If the answer is yes, the Dow is worth about 5000 at historical P/E levels.
I think the bottom is so far away that it's too difficult to put a number on it. 5000 could be right but it could be much lower. Having said that, if money supply begins to grow at more than 20% per annum, this could save the DJIA from falling to 5000. Hyperinflation or deflationary depression .... take your pick. Right now I think the former is more likely .... which suggests that the depths the stockmarket hits won't be as much of an issue compared to how much of a joke the US Dollar becomes.
Funny how common sense sounds so uncommon at times. It is beginning to feel like the Carter years - anyone remember those? Turmoil in Iran, lines at the pump, inflation out the yin-yang. I could see higher inflation / interest rates drive this market to some deep dark places. Not sure if we can make 5000 but wouldn't rule it out. Even with a return to normal growth the US looks on course for a fiscal / monetary crisis. Just pray I don't own any US$ at that point.