Bob, you've just described the long-term problem with investing in stocks that are in cyclical and/or commodity based industries. What should the proper PE be for "peak" earnings, if one believes that 2006 will be a year of level or declining prices in oil and NG? We also had a ton of speculators and hedge funds that felt trapped in these "hot" stocks and so the correction has been sharp and painful.
Of course, if one believes that FY06 will see the steady rise in oil and gas prices, then this is a welcome buying opportunity.....
I think I agree more with Lentinman, who has argued that demand is contracting faster right now than supply which should ultimately lead to lower prices in the future. Of course, the economy could pick up again, but there is the problem of steadily rising interest rates to deal with as well. In sum, there are lots of good reasons to be very cautious on US stocks at present.....