A revealing graph that I can only describe.

Amidst this relentless market rise, comes a graph of S&P earnings versus stock prices. I wish I could reproduce it for you, one of you needs to go the Bloomberg Laboratory to try to recreate it. In a nutshell, it looks like a big X, with prices going up steadily since last year and Earnings going down just as steadily since last year.  Liquidity and the Fed,  money out of the sidelines, money out of bonds, money out of gold, are among the reasons provided.

I have always believed and taught that stock prices care about earnings.  I can see the logic in people buying stocks where management talks up earnings (assuming they are doing it somewhat truthfully). What I cannot see is the reason for bidding up stocks where the earnings have actually been talked down (again somewhat truthfully).


One comment

  1. I don’t see the money leaving bonds yet,
    And earnings have been rising too. Now, they seemed to stabilize though.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s