Zbigniew Piekarski says that investors, unlike lemmings, should not jump too soon

The genus lagurus (arctic lemmings to you and me) are well-known for committing group suicide by falling off a cliff. In reality, this was another Hollywood myth created by the 1958 Walt Disney documentary "White Wilderness". They simply do not do it.
What they do is to breed very rapidly in times of plenty and are prone to population explosions every three to five years. They then exhaust their food supply, most starve to death, and the population "reverts to the mean".
This "Reversion to the Mean" is a fundamental law of nature which the market obeys.
The secret of successful investing is simple: buy low, sell high.
While this is a simple concept, doing it is another matter!
The great mystery arises of whether a price on any given day is low or high.
So, when is a price high or when is a price low? The answer is valuation.
Two primary methods of valuing stocks and markets that have withstood the tests of time are the price-to-earnings ratio (P/E) and dividend yield.
P/E ratios are easy to calculate in theory. To compute a P/E ratio, the price of a stock is simply divided by its latest annual earnings per share. If a stock is trading at $50 today and earned $5 per share, its P/E ratio is 10.
The problem has been that what are accepted as "earnings" are in the realms of "creative accounting" - until now that is.
To determine baseline fair-value P/Es and dividend yields, we need huge amounts of historical price, earnings, and dividend data in order to place ourselves within the historical context.

Professor Robert Shiller of Yale University assembled raw earnings and dividend data from more than 130 years and wrote the book "Irrational Exuberance", published before the equity bubble topped in March 2000.
In his data, the average historical P/E ratio for the general US equity markets (the S&P 500 Composite Index) from 1895-1995 was 14.6 times earnings. The core message of the data is loud and clear. Fair-value for stocks is right around 14 times earnings, a P/E of 14.
If companies are twice fair-value, 28 times earnings, they are in speculative bubble mania territory.
In my graph for US stock prices, I have used the Dow 30 as it is much more widely known. All data is monthly. If there is only one graph that you commit to memory, let it be this one. This knowledge is crucial.
Now you can see why certain commentators are saying that the market is "overvalued". We MUST "Revert to the Mean", and the base camp is still a long way off.
Until two weeks ago, what constituted "earnings" was open to debate. Then on Thursday October 24, Standard and Poor's introduced a concept of "core earnings" and revealed that the S&P 500 companies earned only a little more than $18 last year, not the $24 they reported or the $52.47 estimated. This put the P/E of 500 of the largest American companies at 48.8 and not the 17 that was based on estimated earnings and which the bulls claimed.
A P/E of 48.8 is not the level at which real bull markets typically begin.
What has this got to do with the WSE? Why everything.
If I am not mistaken, TPSA is the largest company in Eastern Europe and has excellent prospects. But its core business is fixed-line telephony. It is, therefore, on par with France Telecom's P/E of 3.85, Deutsche Telecom's P/E of 25.33, British Telecom's P/E of 15.25, Nippon Telecom's P/E of 75.84 and even Portugal Telephone's P/E of 12.17. The P/E of TPSA is 121.10.

And how about Żywiec's P/E of 105.34 and Strzelec's P/E of 160.98. They compare well with Carlsberg's P/E of 19.25 and Heineken's P/E of 20.15.
And then there is Budimex's P/E of 1410.74. WOW! It's on par with a dot-com and will soon construct "virtual reality" buildings.
I know, I know, this is rather simplistic isn't it? I know that soon everyone will have six telephones, drink beer throughout the day, have two houses per family and two cars and drive on more motorways than the Germans.
And there are the expected effects of "economic convergence" to add to the brew. But for my money, I would rather incorporate another four words into my armoury: sell high, buy low.
The genus lagurus consists of three species - luteus, lagurus and prezewalskii. So keep your mind open and your powder dry, and hopefully you will prezewalskii through what is about to happen and will be able to play your luteus by the lagurus in your declining years.

Remember: "Save a little money each month and at the end of the year you'll be surprised at how little you have." - Ernest Haskins