If there is gross over-valuation in the stock market, the impact will be worse.
Analysis based on cash flow would have stressed the over-valuation of the technology sector in the first weeks of 2000 and now warns about over-optimism in the consumer areas.
Market crashes are healthy reactions to periods of over-valuation.
According to the IMF, there does not appear to be significant over-valuation of residential real estate prices in China as a whole, though there are signs of overvaluation in some market segments.
"There is still a huge extended over-valuation in the market - any change in the employment situation and consumer sentiment due to income changes will tend to push prices down, " Mr Stansfield says.
The controversy is yet another to arise in the philanthropic world over the valuation of gift-in-kind, as donated goods going to charity are called.
But he adds that while these factors limit downside, they are offset by a valuation nearing 52-week highs, more challenging year-over-year comparisons, and greater relative exposure to discretionary spending.
In a deep and long recession, valuation on trailing-12-month earnings or average earnings over five to 10 years--the Schiller methodology--seems irrelevant and can lull you into thinking the market's cheap.
Limited downside risk compared to over 100% upside return potential, if the stock trades at a no-growth valuation, looks pretty good.
It is always important to remember that over the short-term stock prices are determined by supply and demand and not fundamentals and valuation.
In addition, gross margin percentage on home sales improved over year-earlier levels on the back of an increase in average sales prices and lower valuation adjustments.
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