Friday, September 12, 2008

Earnings continue to slide

If future earnings have anything to say about the longevity of this bear market, then we're nowhere near the end.

Today the S&P 500 index is 20% below the October 2007 high, yet the projected P/E ratio for the end of 2009 (15 months from now) is 21, which is still highly over valued. That means the market would have to fall another 28% from here - down to 900 on the S&P - to reach the approximate historical average P/E of 15. This is assuming of course that future earnings aren't revised downwards even further. Would anyone care to place a bet on that?

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