Not only are earnings falling, P/Es are falling too. Stock prices are adjusting not only to the lower earnings, but to the new psychology of a depression era. There are times when people will pay $20 for one dollar’s worth of earnings. Other times, they’ll be reluctant to pay even $5. We’ve seen the $20 figure as recently as a couple years ago. Now, the trend is moving in the opposite direction. We’re headed towards 5 bucks. That’s what people will pay for $1 of earnings when this market finally reaches its bottom. Or thereabouts.
The combination of falling earnings and falling P/Es does to stock prices approximately what the Romans did to Carthage in the third Punic War. That’s why we have our Crash Alert flag flying. full article >>
Friday, March 2, 2012
Stock prices delenda est
Bill Bonner on O-Banana's bankster bailout and stock prices: