(WSJ Feb 25, 2009) “The S&P Gets Its Earnings Wrong, Stocks are cheaper than they look”, by Jeremy J. Siegel

Economist Jeremy Siegel (associated with WisdomTree funds, and professor at Wharton) is an important figure.  When the Wall Street Journal published his editorial (read full article) claiming that Standard & Poor’s had a flawed method that massively overstates the S&P 500 P/E, that became something that can’t be ignored.  In fact, Siegel said if S&P had calculated index earnings correctly, investors would see that stocks are historically undervalued.

The blogosphere came alive with comments that spanned the gamut from agreement to disagreement in both polite in impolite tones.

Several of our clients called to inquire, since we have been telling them that stocks are expensive and that the index needs to fall significantly to come in line with current realities, and to be in the lower range of historic P/E valuation.

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Originally incorporated in the U.K. in 2003, Index Oil and Gas Inc. is an early stage oil and gas exploration and production company. Trading on the OTCBB, they have a current market capitalization of $34.32 million. The company has their head office in Houston, Texas, as well as an office in Bath, England. Their oil and gas prospects are in Texas, Louisiana, and Kansas.

In 2007, Index successfully focused on lower risk properties to build reserves and near term cash flow. For fiscal year 2008, Index focused on a balanced and risk-managed portfolio of prospects. The goal was to increase their reserves and production, and their efforts did pay off. Fiscal year 2008 saw the company’s revenue up 273 percent over the previous fiscal year. In addition, production was up 255 percent and reserves were up 100 percent in fiscal year 2008.

The company’s new stage of development is higher-impact wells comprising