An old-fashioned measure of valuation: The rule of 20

An old-fashioned measure of valuation: The rule of 20. It seems like for every doom-and-gloomer saying the U.S. stock market is headed for a 2000-style bubble burst, there's an optimist behind them saying, That's nonsense, and can I interest you in an IPO for an unprofitable Internet company? There is one old-fashioned measure of valuation that rarely creeps into the conversation, and when it does it creates a heated debate over its significance. The Rule of 20 states simply that valuations are fair when the sum of a price-to-earnings ratio and the rate of inflation is equal to 20.The rule of 20 has been embraced by highly respected stock-pickers such as Peter Lynch but as this article suggests - it depends a lot on which measure of earnings you use. Read more: (VIEW LINK)