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90% fall in S&P is wishful thinking. Japan didn't fall that much from its epic bubble (at 80 times CAPE ratio). Only way to get S&P to that kind of decline is maybe full-out nuclear war or bolshevik-type revolution. US at CAPE of 23 is not going to CAPE of 2.3 without something really extreme driving it.
 

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Discussion Starter #42 (Edited)
I think you're forgetting to factor in earnings contraction. Let's use regular P/E. Today:
Earnings = 140
P/E multiple = 20.4
S&P 500 = 2856

(I am using trailing 12 month figures for Earnings & PE, so these are consistent)

Let's say earnings contract 40%, which would be dramatic but easily possible in a depression. In fact Goldman Sachs has recently come out with a 33% decline forecast, similar.

Earnings therefore drop to 84, about where they were in 2010. And say negative sentiment brings P/E down to 7, which you can see has happened several times in history, even during peace time.

We would then have:
Earnings = 84
P/E multiple = 7
S&P 500 = 588 ... which is 80% decline

So maybe you're right, not 90%, but rather 80%. My mistake!

(A short-hand for all the above is 40% drop in earnings and 66% decline in the multiple)

And that's not nuclear war. That's simply 40% earnings contraction, and P/E back to what it was in 1980. Nothing very dramatic, actually. In fact the economy would keep running, and life would still be pretty good.
 
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