Over the past 2 years real S&P earnings have declined by 2% while the trailing 12 month price to earnings ratio of US stocks has jumped 42% (from 13.5 to 19.5x) on thinly participated but highly leveraged stock speculation. Even more historically illuminating, on a looking forward basis, the Shiller P/E (which divides current price by the 10 year average inflation-adjusted earnings) is today at 24.4: at or above the infamous bubble peaks in August 1929, December 1972 and August 1987, while a couple of points below the 27 level reached before the last disastrous decline in October 2007. With Fed help like this, we truly don’t need enemies.
CNBC’s Rick Santelli digs back to see how the Fed’s quantitative easing program has impacted the markets. Here is a direct link.
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