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Stocks are cheaper but still no bargain: This bear market may have several years left

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Even as global economies unravel before our eyes, there's been growing speculation equity markets have bottomed.

Permabears like Robert Shiller and Steve Leuthold argue that stocks have been driven down to levels that are historically cheap. I wish I could believe them, but I don't....

....as I wrote here last week, I believe that the world economy will not be a hospitable place for equities for some time. A long, deep recession, massive debt liquidation, fiscal strains on governments around the world, and a new frugality among consumers could produce sub par economic growth well into the next decade.

And by some key measures, stocks aren't very cheap at all.

At its recent closing low of 7,552, the Dow Jones Industrial Average had lost nearly half its value from last October's closing peak above 14,100. The Standard & Poor's 500 Index was down nearly 52% from its all-time closing high of 1,565.15.

But even at those lows, stocks don't reflect the bargain-basement valuations we've seen at the bottom of other bear markets....

....according to S&P's senior index analyst Howard Silverblatt, the S&P 500 now trades at above 19 times reported earnings for the 12 months ended Sept. 30.

That's much lower than it was in the fourth quarter of October 2002, the last bear market's nadir, when it changed hands at nearly 32 times reported earnings. That period featured substantial write-offs across corporate America, seriously depressing earnings.

But it's also much higher than the 14 times reported earnings at which the S&P 500 traded in the third quarter of 1990 (that bear market's bottom) and the incredible seven times earnings at which the S&P changed hands in the third quarter of 1974, the end of that ferocious bear.