fair value for S&P500

You have heard some experts saying the sky is falling down and S&P 500 is going to crash to 500 while others suggested that current valuation is the best in a generation. What is the fair value for S&P 500?

Given risk-free 10-year bond is around 3%, the required return for S&P should be around 7-10%. (most single A and BBB bonds are trading around 5-7, stock is riskier than bonds so it requires a higher return). A P/E between 10-14 will be justified for a required return of 7-10%. If I take the consensus earning estimates for 2010, which is 80 and discount it by 10% because of the unfounded pension liabilities (most pension plan assume a 8% return which is way off base over last 10 years), a fair value of 720-1080 is derived. Consider how accommodating the Fed and other central banks have been, the market is probably biased at the high end (900-1080).