Friday, November 19, 2010

Yes, but what's the Fair Value?

Chart of the Day:

With third-quarter earnings largely in the books (96% of S&P 500 companies have reported for Q3 2010), today's chart provides some long-term perspective to the current earnings environment by focusing on 12-month, as reported S&P 500 earnings. Today's chart illustrates how earnings declined over 92% from its Q3 2007 peak to Q1 2009 low which brought inflation-adjusted earnings to near Great Depression lows. Since its Q1 2009 low, S&P 500 earnings have surged (up over 900%) and have just crossed above a level that occurred at the peak of the dot-com bubble. In fact, earnings have only been higher than current levels for a 29-month stretch that occurred at the tail end of the credit bubble.