Earnings Continue To Increase

From Bloomberg.com:

"Corporate profits have topped analyst estimates for 12 straight quarters. Analysts that cover companies in the S&P 500 project earnings will rise this year to $104.40 a share, the highest level ever, according to data compiled by Bloomberg. That would represent a 70 percent increase in earnings since 2009, compared with the 22 percent rally in the index in the past two years......The S&P 500 has recovered 24 percent since its low on Oct. 3. Its price-earnings ratio of 14.1 matches the average level last year. The valuation has trailed the five-decade average of 16.4 for the longest stretch since the 13-year period beginning in 1973, according to Bloomberg data."***

Assuming this is a good number then the valuation cone on the S&P for 2012 would look something like this: 

10X earnings =1,044   Earnings Yield =10.44%
11X earnings =1,148   Earnings Yield =  9.1%
12X earnings =1,253   Earnings Yield =  8.3%
13X earnings =1,352   Earnings Yield =  7.7%
14X earnings =1,462   Earnings Yield =  7.1%
15X earnings =1,566   Earnings Yield =  6.7%
16X earnings =1,670   Earnings Yield =  6.3%
17X earnings =1,775   Earnings Yield =  5.9%

Current yield on S&P 500 1.87%**

Yield on US two year = 0.31%**
Yield on US ten year  = 2.04%**
Yield on US 30 year   = 3.20%**

*Long ETFs related to the S&P 500 in client and personal accounts.
**Source Bloomberg.
***Link:  Bloomberg: S&P 500 gets 9% cheaper.