Replies to post #115263 on Biotech Values

[RC2]

when the NASDAQ was thousands of points higher, the P/E of the NASDAQ was over 100. Now, here we are much lower, and the NASDAQ P/E is only in the high-teens

I understand that this board, as its "Values" name indicates, focuses bottom-up, on individual companies. That's what attracted me to it, since I am by nature and habit a bottom-up value investor. However, I've also found over the years that it's critical to keep a weather eye out on broader issues.

In my view, the broad equity markets have been in a sideways trading range since, say, 2000. During that time broad-market P/E's have been declining: the P has stayed flat even as E's have been rising. This process, of multi-year (say, 18-year) sideways markets and P/E "multiple compression," has occurred several times during the previous century, following equally long bull markets and presaging broad new bull markets -- once the P/E has sufficiently compressed to make equities compelling again. How low a P/E is "sufficient?" Historically, under 10...