Delusions And Tyranny In The Time Of Covid

Here they go again. After a mere three day outbreak of a modicum of sanity on Wall Street, the robo-machines and Robin Hooders were back to scooping up the dip yesterday and giving it back today.

But still, what are they thinking? Truly.

With nearly every S&P 500 company having reported its Q2 results, LTM earnings on a GAAP basis posted at $65.00 per share and on a so-called ex-items or “operating earnings” basis the LTM figure was $125.40 per share.

So at today’s 3339 closing price on the S&P 500, the current trailing PE ratio ranges between 51.4X the earnings CEOs/CFOs certify on penalty of jail time or 26.6X the Wall Street curated and burnished version of earnings from which all asset write-offs, restructuring charges and other one-timers/mistakes have been deleted.

Of course, these deleted GAAP charges reflect the consumption of real corporate resources, such as purchase price goodwill that gets written off when an M&A deal goes sour or the write-down of investments in factories, warehouses and stores which get closed; and, as such, they absolutely do diminish company resources and shareholder net worth over time.



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