Bloomberg: Stocks at 25.8x Earnings

By: TraderMark Tuesday, September 09, 2008 1:26 PM

Outside the U.S., ``the risk factor in the earnings estimates is a little higher than you might see on Wall Street.''

Should analysts overstate profits in the second half by the degree they did last quarter, earnings for S&P 500 companies will fall to about $72.17 a share. That would be below the level of 2005, when the S&P 500 was on average 5.9 percent lower than today. The U.S. economy won't support the earnings analysts predict, said Walter ``Bucky'' Hellwig, who oversees $30 billion at Morgan Asset Management in Birmingham, Alabama.

The most bullish profit forecasts are for U.S. financial companies. In the fourth quarter, brokerages and insurers will boost earnings almost fivefold from a year ago, analysts say. (gosh... cmon now - don't we ever learn) ``I don't believe we're through this credit crunch,'' said Stephen Wood, New York-based senior portfolio strategist at Russell Investments, which oversees $213 billion. ``Credit portfolios are beginning to deteriorate. Financials will continue to exert downward pressure on earnings for the balance of 2009.''

Michael Steinhardt, who returned an average 24 percent a year for almost three decades when he ran his New York-based hedge fund Steinhardt Management Co. (wow), said forecasts for an earnings rebound are a false hope. ``My intuition is that they are too early,'' he said. ``In an ordinary cycle, this should be the time to start thinking about buying. This isn't an ordinary cycle.'' (Bingo - this is what I keep saying. Most of todays 20/30/40 year old trader types only know the company led recessions of early 00s and early 90s - they don't remember, nor bother to read, about what a consumer led recession - 1970s and early 80s - looks like or how it works - so they are constantly buying "anticipating" the bounce that keeps failing them. And they continue to do so - as they have done much of the past year - not only a consumer led recession for the first time in 3 decades but one with a historic debt bubble and housing depression? And that will all get fixed in a span of 15 months?)

Had not heard of Steinhardt before but 24% annualized over nearly 3 decades is great - he ended his career in 95 so it was a different era, than the current 10 years of "Lost Decade" (0% gains in the S&P over past decade) but still interesting. (Mar 26 - WSJ: Stocks Tarnished by Lost Decade) More info on him here. And here.

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