However, the value of the market and its stocks is not determined by where we are on some imaginary cycle. It's influenced by supply and demand and, realistically, it's mostly demand because the supply of stock is not changing that much.

Demand is a function of several factors: confidence in America, confidence in inflation expectations, interest rates and, most importantly, cash flows of the underlying companies. Using the above metric, the market is the cheapest it's been in the past 10 years, including when it was scraping the bottom in 2001-02.

For instance, Wal-Mart (WMT - commentary - Cramer's Take) has steadily increased its book value per share for the past 10 years. Last year's increase in book value, from 10.12 to 11.67, was a 16% increase. And yet, today Wal-Mart's price/book ratio stands at 3.90, the cheapest it's been in the past eight years, and Wal-Mart's P/E ratio, at 17, is the cheapest it's been in 10 years. To put this in perspective, look at Wal-Mart's average P/Book and P/E ratios over the past eight years.

Wal-Mart Discount The company's multiples are at eight-year lows
	P/E	P/Book
Today	17	3.9
2004	23	4.5
2003	26	5.3
2002	29	5.3
2001	34	7.6
2000	38	8.1
1999	43	9.4
1998	32	9
1997	20	4.8
Source: Formula Capital

The market is basically giving Wal-Mart almost no credit or chance for any future increases in cash flows and earnings.

Perhaps this is because of Hurricane Katrina, or perhaps it's because of rising gasoline prices. (Although rising gasoline prices could arguably help Wal-Mart because it sells gasoline and people will want to go to a one-stop shop.)

However, Wal-Mart already announced that September sales were on target and Katrina will in fact affect earnings, by 1 cent a share. But it reaffirmed 55 to 59 cents on the year. So what's the problem?

Six Leaders Priced for No Growth