dshort.com has a good piece showing the PE ratio based on as-reported earnings  and actual prices. Here’s their chart.  It doesn’t look cheap to us – what do you think?  If the PE ratio falls by half, then reported earnings have to double for the stock market level to not fall further.

As TPC points out, using actual reported earnings is the only way to keep emotion out of the analysis.

Hans Wagner at tradingonlinemarkets.com has a straight forward piece at Market oracle that makes a simple point:  Standard & Poor’s estimates reported earnings for the S&P 500 in 2010 will be $39.59.  At even a conservative estimate of $50.00 and a generous PE ratio of 15, the S&P would be valued at 750.  The S&P 500 closed today at 851.92. The market is pricing in future earnings that can not be achieved.  Duh…