Inflation adjusted S&P 500 earnings ranged between $30 and $40 from 1960 until about 1995. That is pretty consistent for a long time. Alan Greenspan uttered his Irrational Exuberance words in 1996. S&P 500 earnings surged to $70 during the Dot.com bubble, then they crashed back to the $30 to $40 level. They then surged again to $90 during the housing bubble, then they crashed again to less than $10. They have surged back above $80 during the current QEfinity bubble. What do you think happens next?
Real wages are declining, employment growth is dead in the water, Obamacare is sucking the life out of small businesses and individuals, Europe is in a Depression, China’s real estate market is imploding, Japan is on a kamakazee mission to destroy their currency, the Middle East and Korean Peninsula are one incident from exploding, and Bernanke keeps printing like there is no tomorrow. Is this a recipe for an earnings surge, or earnings collapse?
Wall Street doesn’t seem to care. There are bonuses to make, customers to fleece, and politicians to be bought off. Earnings schmearnings. That crap is for schmucks. Uncle Bennie will provide the juice and when Wall Street crashes the economy again, he’ll be there to save them. Privatize the profits and socialize the losses. It’s worked so well.