Steadfast FinancesS&P 500 Earnings Back to Credit Bubble Highs

S&P 500 Earnings Back to Credit Bubble Highs

Filed in Infographics & Chartology , Investing 101 4 comments

Two years after making the observation that terrible earnings news was the time to buy (see first chart), it looks as if the billions of taxpayer dollars (via future earnings) have gotten corporate earnings back to credit bubble highs (see second chart).

From May 18, 2009:

An Index Fund Investor’s Dream: S&P 500 Earnings Nearing Historical Lows
Image Source: Chart of the Day

Fast forward to today and imagining a world where the S&P earnings were your only metric, it’s almost like nothing ever happened — and no lessons have been learned.

The real question is whether or not corporate earnings can remain at the levels, maybe even grow, without the steroids that is quantitative easing.

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Posted by CJ   @   17 June 2011 4 comments
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Jun 30, 2011
3:32 pm
#1 Mike :

Not to sound snarky, but how is the credit bubble different from the Fed induced QE and QE II bubble we’re in now?

Jul 6, 2011
11:44 am
#2 Matt SF :

I can answer that multiple ways depending upon your point of view (for or against). But in the end, QE was intended as a correction action for the credit bubble whereas those who participated in the credit bubble knew they were “selling crap” to their clients.

Some argue that QE was analogous to “drug rehab” where you have to give the patient smaller quantities of drugs so their system doesn’t go into total withdrawal and seize up, but rather, they can slowly wind down off whatever they were on to minimize shock.

Jul 7, 2011
9:10 pm
#3 Mike :

Interest point. I guess QE is more of a controlled bubble then, eh?

Jul 7, 2011
9:49 pm
#4 Matt SF :

That’s why we call the stock market rally from 2009 to 2011 the “reflation trade”.

Basically, we’re close to where we were in 2007 sans the USD, gold, more debt, etc.

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