Montier: Value Investors Versus Hard Core Bears

James Montier, the world' s top ranked strategist at Societe Generale writes about "Value investors versus hard core bears", and this excerpt catches the mind (my emphasis):

My recent bout of bullishness has revealed that our mailing list has two distinct constituencies. One group might be best described as value investors. The other group are probably best characterised as hard-core bears. The first group understand my desire to become more bullish as valuations drop. The second tend to argue that my valuation measures are overly generous. In particular, they are arguing that the 10 year earnings behind the Graham and Dodd PE are overstated. My examination of both the top-down and bottom up viewpoints finds little support for this accusation.
Go back a few years and I was regularly told my Graham and Dodd PEs (G&D) were
making the market look expensive because they used 10-year average earnings which didn't reflect high secular growth rates. These days I am being told that my measures make the market look artificially cheap as the earnings for the last ten years have been overstated. I suspect these swings tell us more about market psychology rather than valuation.

Market psychology rather than valuation ... We had the chance to buy cheaper equities in 1980ties, after the stagflationary environment, not mentioning the deflationary era of Great Depression. Obviously the value investors are so bullish to have the chance to buy so cheap after so many years of overvalued stocks, that it does not matter what were the lessons during Great Depression. Well, Green Shoots mean that worst is averted?

Click on chart to enlarge, courtesy of Societe Generale.