Fannie Mae-No Politics (FNMA)

[Donotunderstand]

note

when inflation is low (interest rates low !!) the normal PE is huge
when inflation is high (interest rates high) the normal PE is tiny

that is because the PPS of a stock via the invisible hand regresses to the NPV of future earnigs DISCOUNTED (so the higher the discount rate the lower the PPS --- which then creates a lower market PE (market PE is a derivative of sum of stock PE - which is a derivative of NPV of earnings (some say dividends)

so be careful with any normative market PE as that may vary from 10 to 20

look for a picture of best fitted line of interest rate and PE - it will blow your mind !!!

And - history shows - when the market is in a good mood it goes beyond historical correct valuation by 30-40 percent before moving down

so - if I think the market is priced right - and it is on the UP - I expect it to keep going up - in overpriced territory by say 30%

If I was timing I would keep that in mind

My timing is how much cash to have for mitigating a down market - anything from one year to three