Interesting times

Looking at the price-to-earning ration of the S&P 500, it appears that stocks are now cheap.

On Thursday the yield on the two-year Treasury note fell below 1% and the yield on the 3-month bill was .02, as low as it was in September. The data are from a Bloomberg article.

The stock market seemed reassured with the announcement that Geithner would be the next Treasury Secretary closed up on Friday. It would be nice if Thursday was the low. Maybe it will be, but predicting is hard to do.

In late October I had a little contest in one of my classes in which students were supposed to answer four questions:

Question 1: What will be the lowest value at closing for the S&P 500 in the present market panic, which for the purposes of this contest is between September 1 and November 28? (It might have happened already, it may still be coming. You decide.)

Question 2: On what date did or will the S&P hit the low before the end of November?

Question 3. What will the S&P close at on November 28?

Question 4. Will the S&P rise or fall on November 5?

Four entered. At least two thought the lows were reached on Oct 27, 2008 at 848.92. They all thought the market would rise Nov 5. And they were all predicted a S&P value of about 1100 on Nov 28. At the time, I thought those were very reasonable predictions.

We live in interesting times.