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!