Market's Gone From Expensive to Cheap

 

This column was originally published on RealMoney on June 7 at 9:14 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.

Is the market cheap or expensive? This question is at the crux of whether you can wait to buy or whether there is not much further to fall.

If you look at the price-to-earnings ratios for the market right now, you'll see they're nothing special: 20 for the Dow and 17 for the S&P 500. The Nazz is worse, at 32.

But if you look at the estimated P/Es, at the future, you get reasonable numbers like 15 for the Dow and S&P. The Nazz is still tougher, with a 26 P/E, but you have much higher growth over there.

What I think these say is that there are plenty of stocks within the Dow and S&P that can be bought right now with minimal downside, because they're supported by their yield and P/E. The Nazz, though, is tougher, being supported by just growth.

The one thing that does matter, though, is history. You have never gotten hurt badly buying at 15 times forward earnings. And you have made a ton of money when you have.

Keep that in mind during today's panic, because you know there will be one. Keep in mind that the store you are shopping in is no longer expensive, it's cheap!

>To order reprints of this article, click here: Reprints

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Listen to Cramer's RealMoney Radio show on your computer; just click here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here.

TheStreet.com has a revenue-sharing relationship with Traders' Library under which it receives a portion of the revenue from Traders' Library purchases by customers directed there from TheStreet.com.

TheStreet Premium Services    For Personal Service: 877-471-2967

Jim Cramer
Jim Cramer's Action Alerts PLUS:
Trade right alongside a Wall Street pro — enjoy access to his Charitable Trust portfolio and be sent trade alerts BEFORE he makes a move. Learn More
New: ETF Profits
ETF Profits:
Get money-making ideas from the hottest investment vehicle on the planet. Our experts show you how to play various ETF sectors to help pump-up your portfolio. Learn More
OptionsProfits
OptionsProfits:
Get 50+ trade ideas a week from the industry's top options experts. Plus — exclusive commentary on market trends and essential trading tools. Learn More
Doug Kass
Real Money:
Our team of professional Wall Street Pros — including Jim Cramer, Doug Kass, and Nicholas Vardy — delivers intelligent analysis, timely trade ideas, and colorful commentary. Learn More
Stocks Under $10
Stocks Under $10:
Break into the market with small- and mid-cap stocks... all $10 or less! David Peltier tells you exactly which low-priced stocks he's buying and selling. Learn More
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
blog comments powered by Disqus
Dow Jones S&P 500 NASDAQ 10-Year Note
12,890.46 1,351.95 2,927.23 20.47
Oil *
118.75
UP
6.51
UP
1.99
UP
11.37
UP
0.72
10 Yr
2.05%
SPDR Gold
168.02
+0.05%
+0.15%
+0.39%
+3.65%
Data delayed 20 minutes

Top Stories and Tools

Brokerage Partners

After the Bell

Before the Bell

Booyah! Newsletter

ETF Daily

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

We respect your privacy.
Podcasts

Connect with TheStreet