As Reported Earnings 9/17/05: Lets look at estimated "as reported top down earnings" that include options expensing, law suit settlements and other write offs. (Note. These numbers have not changed in 3 months so I suspect they are only updated by S&P every quarter where they used to update them more often.BTW, some of us have "reverse engineered" Brinker's timing model and it is quite bullish by my estimates. The key thing it would be looking for now is an over heating economy. This won't happen this year as almost every economist expects job losses and GDP slowdown due to Katrina and Rita. When we start to rebuild and if we get high inflation with huge job growth... then I think it could signal a switch, especially if TTM (trailing twelve month) PEs return to the 20's in the excitement.For 2005, S&P estimates this will be $75.08 (last month $75.08). This gives a forward PE of 16.3 which is quite reasonable.
For 2006, S&P estimates this will be $76.63 (last month $76.63) for a forward PE of 16.0.
It is worth buying an index fund at Vanguard just to get their quarterly newsletter that graphs P/E ratios back to 1989. Vanguards says the Mean PE for the past 15 years was 20.5 on "operating earnings" and 24.34 on "as reported" earnings. PEs have been in single digits when inflation is high and interest rates are in double digits, but neither of these are true today so mid to upper teens for PEs seems reasonable.
Remember, these numbers include options expense and the balance sheets are much "more honest" these days with Sarbanes-Oxley laws and people like Bernie Ebbers on the way to jail for lying about WorldCom Earnings.
Bob Brinker Fan Club
I recently emailed members of the Bob Brinker Fan Club my latest chart showing a plot of the "bulls over bulls plus bears" Investor's Intelligence survey going back to 1998. There was a sharp decline in bulls over bulls plus bears which signaled to us a tradable market bottom was near. The sentiment declined to a support line I identified. The market rallied significantly after I sent out that chart showing sentiment holding support. If you would like a copy of the latest "bulls over bulls plus bears" chart (in pdf format) then sign up to get on the mailing list at the Bob Brinker Fan Club and ask me to send it to you.
