Dr. Marc Faber's recent article, An Anatomy of Bear Markets, takes a look at the way we define bull and bear markets and offers an insightful view as to how we might judge asset prices in real terms. In the following passage, Faber gives us a view as to how we might judge price movements in an inflationary period:
"In case we should experience continuous monetary inflation, which could lift, over time, all asset prices such as stocks, real estate, and commodities, some asset classes will increase more in value than others. This means that some asset classes while rising in value could deflate against other asset classes, such as happened with the Dow against gold since year 2000."
For this article, Dr. Faber draws on the work of Russell Napier, author of Anatomy of the Bear, to further his discussion about the manner in which markets/asset classes shift from overvaluation to undervaluation.
I would also suggest that anyone interested in these discussions listen to Russell Napier's recent interview on the Financial Sense Newshour. Some very interesting perspectives of how stock market bottoms unfold, from a researcher who obviously knows how to uncover important data through study of market history.