Cover of MoneyWeek issue 408

The great currency crisis

31 October 2008 / Issue 408

How to protect your wealth... PLUS:

  • Three contrarian share tips from toxic sectors
  • Fred Harrison on how to end boom and bust
  • How I made a million copying celebrity fashion


The bear has plenty of grunt yet

Is it over? It seems a reasonable question to ask. After all, on almost every measure, global stocks look stupidly cheap relative to the last couple of decades. And perhaps the dramatic bounces in markets this week (with the Dow Jones alone up nearly 11% on Tuesday) suggest investors are seeing that and slipping back from panic to greed once again. And that, as a result, the bear market is at the beginning of its end. As regular readers can probably guess, I don’t buy this interpretation of events for a minute.

For starters, markets aren’t cheap. Look at the FTSE 100. It’s trading on a p/e of just over seven times and paying a dividend yield of 6%. But while these numbers look quite fantastic, they’re also pretty meaningless. Why? Because the important bit of the p/e – earnings – is no more than optimistic guesswork. The real p/e is much higher than that. We just don’t know how much higher.

This week’s market action might signal the start of a massive bear market bounce, but I very much doubt it signals the end of the bear market.

• Read the full editor’s letter here: The bear has plenty of grunt yet