The LFB

Is It Time to Buy? What History Shows

Show me a sustainable rally while earnings are decreasing. You can't because one doesn't exist.

Earnings are going down a lot further than estimated and the employment situation has much further to worsen. Consumers are deleveraging and they won't use credit (if it's even available) for quite some time.

Why on earth would anyone expect consumers will spend when their assets (home and 401k) have been devastated.

Mohamed El-Erian of PIMCO has it exactly right. We are not returning to business as usual. Rather, we are facing "the more nasty reality of a volatile journey to a different destination."

Is It Time to Buy? What History Shows

I really don't know why you and everyone else who writes about this stuff doesn't see this:

Put EPS on an S&P chart. You will see that the sustained 2003-2007 rally didn't begin until long after earnings had crashed and AFTER they begun to rise once again.

And if you look at the EPS during the rally, you'll see it goes up.

Of course there will be intermediate ups and downs-we're in a 18% upswing on the S&P right now from the Nov. 21 low. But these are moves for traders, not investors.

Stocks are probably more likely to move up and down like this without a sustained rally for several years because earnings still have further to fall.

The ones who saw price declines coming and bought debt are way ahead of the game. Why? Because in the three months to October, headline CPI fell at a 4.4% annualized rate which means during that time they were earning maybe 8% annualized. And they got to sleep at night.