Now that the military battle in Iraq is over, my
sense is that equity markets want to go up. But I don't
believe that this is the start of a new bull market. It is
just the eye of the storm of the secular bear market. The
bounce will eventually die down and the bear market will
reassert itself. We have not seen the lows yet.
The market will ignore valuations for now. These remain stretched.
I estimate the S&P500 to be selling on 18 to 19 times this
year's earnings. On a multiple of dividends, US equities are
absurdly expensive - and dividends count these days. I trust
dividend multiples more than P/E ratios because the manifold
definitions of profit floating around throw up too many conflicting
messages. But the Nasdaq is outperforming the broader indices. That
means two things are clear: the market wants to go up and it
doesn't give a toss about valuations for...
