The random walk theory does not look right and current index valuations have a strong predictive ability for future long term returns.

There remains way to much focus on calling a bottom and looking for signs of a market bottom based on historical analysis. While it is important to be versed in the market’s history and use that knowledge as a rough guideline, my focus is on the here and now.

Following on from yesterday’s How Low Can We Go, I thought it would be good to look at the S&P earnings data. The S&P data shows TTM reported earnings have been falling for a year after peaking in Q2 2007 at $84.95. Earnings are down 29% to $60.39 as of Q1 2008. As if that is not bad enough, estimates for Q2 08 predict earnings hitting a low of $51.68 before improving slightly in Q3 and improving thereafter.
A rosier view is gained by concentrating on the quarterly earnings rather than …

How low can we go? Dow 8000? S&P 500 in the 900s? Or are we already close to the bottom? It’s time for a historical refresher. The S&P500 closed last week at 1,099.23, the Dow at 10,325.38. It has been a very bad year thus far as this poster on TMF points out. Since 1926 this is currently the fifth worst calendar year for the S&P and the fourth worst rolling decade.