Talk about an incomplete picture! Why don't you actually try looking at the data itself? Estimates have continually been marked down and forward operating earnings are wildly optimistic and resemble more fantasy than fact. Positive EPS guidance after already lowering their number? It's a game in a house of mirrors.
Ghost of Igloi wrote:
Ryan, Maserati, and agip:
Good comments. My view has always been that investing in stocks and bonds, or anything really, should be based on some measure of cash flow. The historical average GAAP PE of the S&P 500 is about 15. Current GAAP EPS is around $90 per share. Fair value calculation would be 15 x 90 = 1,350. At a 2.4% Yield the 10 Year Treasury is trading on a cash flow basis slightly ahead of inflation.
You paint an incomplete picture. The market is forward looking. Earnings have been growing and are expected to continue that trend. An above-average number of companies have issued positive EPS guidance. So it's only natural that valuations are above average.
By the way, you also fail to acknowledge that you're talking about a moving average.
Your point is a good one, but you do a disservice to the readers by ignoring this important information.