Martin Hutchinson:The profits bubble

At some point therefore, the end of present Fed chairman Ben Bernanke's misguided monetary policy (probably triggered by an unpleasant burst of inflation accompanied by insanely high oil and commodity prices) will cause corporate earnings to revert to their long-term average, losing their current 55% premium and returning stock prices even on their current fairly elevated P/E ratio to around the 1995-equivalent level of 8,100 on the Dow.Add to that a decline in the P/E ratio on the S&P 500 Index to 10 times, and you get a value on the S&P 500 Index of 589, equivalent to perhaps 5,500 on the Dow.