How can I tell if the stock market is overpriced?

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	How can I tell if the stock market is overpriced? By The-Adviser.com -
SERVICES Money Management Portfolio Reviews 401(k) Rollovers Retirement Financial Plans Estate Plans College Savings Clients Only WHY US Benefits Available Services "Interview Us" Fee Information Disclosures Applications Clients Only THE COMPANY Background Philosophy The Press Policies Opportunities LINKS Home Page Related Links Stock Quotes	New York - Our philosophy is that the stock market should be analyzed by measuring value and sentiment. Measuring Value Price Earnings Ratio - The Standard and Poor's 500 Index should be compared to historical trading ranges. For example, in early 1998, the S&P 500 PE ratio approximates 26 which is an all-time high. This compared to a ratio of 21 and 16 in 1997 and 1995, respectively. Price/Book Ratio - This ratio represents the price that investors are willing to pay for a set amount of book value. For example, in early 1998, the S&P 500 Index was selling for approximately 5x book value which was up from 4x book value in 1997 and from 2.5x on average over twenty years. Given the growth of technology and software firms which have off-balance sheet intangibles, we believe that the ratio should be viewed within the past 10 years. Dividend Yield - This is the rate at which company pay out free cash flow in the form of dividends. In 1998, the yield was 1.5% which compared to 3% in 1992. A lower relative yield has historically been viewed as a dangerous sign; however, some investors believe that companies are finding other use of cash such as acquisitions and stock buybacks and that historical ratios are less meaningful. Measuring Sentiment Bulls vs. Bears - Many organizations and new services prepare polls that measure what investors believe will happen to the market. If more investors are bullish (the stock market will go up), this could be viewed favorably as compared to a negative consensus view. Seats on the NYSE - The price of membership seats on the New York Stock Exchange routinely climbs during bull markets. With one of our professionally managed accounts - you will never have to worry about whether the stock market is overpriced or not. Our professionally managed accounts are designed for investors that are seeking the benefits of day to day - independent professional advice. Why not find out more? Just Ask The-Adviser.com. Click here to learn about our professional money management accounts	We like to measure the market by value and sentiment. Got an investment question? Ask The-Adviser.com Open one of our professionally managed accounts: Brokerage Accounts Traditional IRAs Roth IRAs 401(k) IRA Rollovers 403(b) IRA Rollovers College Savings Retirement Savings Hire The-Adviser.com Click here for our Top Ten Investment Picks Financial Advisory Services Money Management Retirement Planning Portfolio Reviews 401(k) Rollover Assistance College Savings Financial Plans
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