Siegel and P/E

In 1994 Jeremy Siegel, professor of finance at The Wharton School, wrote "Stocks for the Long Run" which analyzed the behavior of all investment media as far back as their returns could be reliably evaluated. He concluded that for any ten year period, stocks out performed every other investment for that period. Looking at the market in the two decades since, the stock market has continued to average his predicted 6.7% gain, albeit with a lot of volatility. (One can see how panicking in a down market could just murder you.)

Here, however, is a very interesting chart that grades market behavior in decades separated on the basis of the market's underlying P/E ratio: (It may not come through. The essence is that growth is present in every single ten year cycle in the U.S. market with the exception of several ten year segments since 9/11. But the growth, if compared to PE, is remarkably higher in those decades with low PEs. Or, as Graham and Dodd wrote in their classic Security Analysis in 1934:

"Hence we may submit, as a corollary of no small practical important cachet, people who habitually

purchase common stocks at more than about 16 times their average earnings are likely to loseconsiderable money in the long run.")