Secular P/E Ratio Bears vs. S&P Earnings Yield-Treasury Spread Bull

A look at the bear market and 
monthly MA's from my previous post
Comstock Partners continues to believe we're in a secular bear market in their latest post titled "Lengthy Bullet Points on our Bear Case Regardless of Interim Rallys(8/4/2011):

"Although many on Wall Street believe the market is currently undervalued we disagree. The market expected the S&P 500 to earn $108 in early May of 2008 but due to the bursting of the bubble the earnings came in at $50 for operating earnings (excludes write-offs) and $15 for reported earnings (GAAP). The analysts that are using $100 this year and more next year for the S&P 500 and a P/E of 15 to magically come up with 1500 on the index are guilty of faulty reasoning. We believe we will trade at below 10 times depressed earnings which should take us down to the lows of 2009 or below. It is clear to us that there will have to be a global slowdown in the second half of this year and next. The reasoning for the slowdown is again the debt, but not just the sovereign debt, the private debt is even worse than the public debt." continue reading

John Hussman of Hussman Funds believes this as well. From tonight's note, "Two One-Way Lanes on the Highway to Hell":

"Wall Street continues its servile attachment to forward operating earnings, seemingly unconscious that the perceived "norms" for the resulting P/E are artifacts of a bubble period. The fact is that historical periods of overvaluation and poor subsequent long-term returns correspond to forward operating P/E multiples anywhere above 12, while secular buying opportunities such as 1950, 1974 and 1982 map to forward operating multiples of only 5 or 6 (based on the strong correlation but downward-biased level of forward operating P/E ratios, when compared with multiples based on normalized earnings - see Chutes and Ladders for a graphic)."

(Continue reading... Hussman agrees with Jeremy Grantham that the S&P is fairly valued at 950 and that P/Es reflect mispriced assets created by the "Greenspan-Bernanke regime".) To counter these bearish views, Matt Busigin at Macrofugue wrote an interesting post (with charts) titled "Fat Pitch" that said equities are cheap based on the S&P earnings yield-Treasury yield spread. From Macrofugue:

"Equities are now cheaper than they were in 1998, or even 1987, 2002 & 2008 by measurement of Equity Risk Premium (earnings yield minus risk-free yield) of 5.86%." continue reading

What about book value? Felix Zulauf of Zulauf Asset Management thinks the S&P reverts back to book value before the secular bear market bottoms. He explained this during a long interview with McAlvany Weekly Commentary which I will look into further in a different post. Anyone have a historical chart of the SPX or Dow Price/Book ratio? As you can see, there are many different ways you can value financial assets. I'm wondering when the S&P 500 priced in Gold breaks above the downtrend line from 2007.