After 50% Loss, Are Stocks Cheap?

As we bounce between big gains and equally big losses, is the market undervalued or overvalued?

According to PIMCO’s Bill Gross stocks aren’t as cheap as they appear. “Better to own corporate bonds than corporate stocks," Gross, wrote in his December Investment Outlook letter.

Extensive government intervention in banking and other sectors of the economy in response to the global financial crisis has reduced corporate America's ability to generate profits, Gross argued.

"I believe in stocks for the long run -- but only if purchased at the right price," or "from a starting price that correctly anticipates the economy's growth and its share of after-tax corporate profits within it," he wrote.

I agree with what Bill Gross says, muses Karen Finerman. So the issue becomes how do you find the right price for a stock.

Finerman can’t say for sure, but she thinks you probably have to go back 10 or even 20 years before you can find the proper mean, or average.

It’s probably best to toss out the last 4 or 5 years because so many influences were artificial, she concludes.

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Trader disclosure: On Dec. 2nd, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (MSFT), (WMT), (SDS); Macke Is Short (YHOO); Adami Owns (AGU), (BTU), (C), (GS), (MSFT), (INTC), (NUE); Finerman's Firm Owns (DSX),(MSFT); Finerman's Firm Is Short (IYR), (IJR), (IWM), (SPY), (MDY), (GNK), (USO), (BBT). (COF), (EXM); Pete Najarian Owns (UYG) Calls, (TLM) Calls

Jon Najarian Owns (SLW), (BP), (NXY)

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