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Pro Analysis

Santoli: Breakdown of the bubble vs bargain debate

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange.

The value of the stock market has never been higher. Does that mean stocks are very expensive?

The market slouched sideways for more than a year while bonds soared in value. Might this make equities relatively cheap?

Getting a fix on stock-market valuation is both simple and mysterious. There are countless methods for calculating how shares are valued and sundry theories for what they "should" be worth. Valuation is such a malleable concept that we now simultaneously have professional investors calling stocks alternately a bubble and a bargain.

So here's an attempted run through the valuation maze, with a hope to emerge on the other side with a helpful perspective on what a buyer of stocks at today's prices is getting in return and might expect from the investment.