Permabull argues for 40% rise in stocks..

Perhaps he should have a couple of drinks with Mervyn King..

(Here is Mervyn King, if you must know)

Wharton’s Siegel: Stocks a Bargain, Could Rise 40 Percent
Tuesday, 18 Oct 2011 08:13 AM
By Greg Brown

Buy stocks now, says Wharton professor Jeremy Siegel, because even if earnings decline sharply equities will remain a relative bargain.

Valuations are very low, Siegel tells the Motley Fool. The current price-to-earnings ratio of 11.5 should be compared to an historic P/E ratio average of about 19, given the interest rates of today.

Even if earnings decline sharply, which could be the case if the United States enters a new recession, Siegel sees bargains all around right now. Some analysts project that the S&P will earn $112 next year, the Motley Fool reports, although stock market bears don’t buy it.

Nor does Siegel. “I don’t believe the number. I think it will come down,” he says in the interview. However, “you don’t need growth to justify these numbers. And if we actually earn $112 next year? Oh, god. It’s a bonus. You’ll see stocks up 30 percent or 40 percent.”

Jeremy Siegel
(Associated Press photo)

Siegel is best known for his bestselling Stocks for the Long Run, in which he makes the case that equities outshine all asset classes over holding periods of greater than a decade.

The U.S. economy is on the edge of “faltering” into possible a new recession, according to Federal Reserve Chairman Ben Bernanke, who has taken interim steps to try to shore up finances via new, extraordinary liquidity measures.

The latest U.S. output numbers suggest the country is on track to avoid an outright plunge. The July to September gross domestic product numbers came in at between 2.3 and 2.7 percent. Retails sales strengthened and gas prices have declined, putting more money into consumers’ pockets.