Interesting analysis of historical earnings in the Barron's article What's the Real P/E Multiple?
There's more we can do to make sense of earnings: The best way to measure present earnings and future earnings is to smooth them out over long periods. Earnings can grow at only approximately 6% a year over the long term. The trend is limited by the growth in real GDP plus inflation. And long term, real GDP cannot grow faster than the increase in the labor force plus the increase in productivity.
If you don't accept this, look at a long-term chart and draw a 6% growth line through the earnings. It is clear that earnings sometimes rise above the line and sometimes fall below it, but earnings always revert to the 6% mean.
Going back to 1950, every instance where actual earnings rose above trend-line earnings was followed by a period where actual earnings went well below trend-line earnings.
Comstock Partners believes that we have entered such a period now, and that the market is trading at such a high multiple of trend-line earnings that it will be difficult to make money.
You could even lose a lot of money.
Source: Irrational Exuberance