How About Those Earnings?

clipped from globaleconomicanalysis.blogspot.com Inquiring minds keep asking "Is The Bottom In?" Of course, no one knows for sure. However, I believe it is not, and one of the reasons is the complete collapse in S&P earnings. Earnings Estimates In Is That Recovery We See? John Mauldin posted the following chart of earnings estimates. The S&P closed Thursday at 888. That's a richly priced PE of 31. Let's assume that earnings recover to $48. That's still a richly priced PE of 18.5. A bear market bottom might sport a PE of 10-12 but let's be generous and use 15. 15*$28.51 would put the S&P 500 at 382! Let's be more generous and use an earnings estimate of $48. 15*$48 would put the S&P 500 at 720! Those expecting still higher earnings need to consider the Effect of Household Deleveraging on Housing, Consumption and the Stock Market. No matter how you slice and dice things, fundamentally the stock market is very pricey.