Once Again, Earnings Prove the Bears Cannot Get It Right

Or perhaps I should say another eight billion dollars. Since the end of March, just a few short weeks, that's how much Wall Street has upgraded its appraisal for the S&P 500's earnings over the last year.

If S&P 500 earnings grew at that rate for a whole year, they'd rise 14.4% — an earnings gusher. And don't think it can't happen. Earnings have been growing at that rate or better for most of the last three years.

Why not make it four?

If that were an impossible goal, then as these spectacular earnings numbers came in, we wouldn't see upward revisions in forward-looking earnings forecasts. Analysts would assume that the booming earnings being reported now were all in the past, not to be repeated in the future. But instead, forecasts for future earnings are rising just as fast as past earnings.

As we came into this earnings season several weeks ago, the bears were in control of sentiment and expectations, just as it seems they always are. How many authoritative-seeming "analysts" and "economists" and "strategists" did you see on CNBC warning about the impending earnings disappointment, as the housing slowdown and the subprime mess take their toll on the economy?

We've heard all that same twaddle every earnings season for the last three-plus years of consistent double-digit earnings growth. Will the bears never learn?

Apparently not. Remarkably, even as upside surprise after upside surprise pours in this earnings season, and stocks make new all-time highs, they try to find ways to make it seem as though they've been right all along.

One particularly brainless bear with whom I'm sometimes paired on CNBC debates tried to make the case that, if you took energy-sector earnings out of the mix, overall S&P 500 earnings would actually be down this quarter.

Investors listening to someone say such a thing on television with a straight face tend to believe it — but nothing could be further from the truth. Energy-sector earnings are actually down this quarter, while overall S&P 500 earnings are up by something like $11 billion. Take energy out and the S&P 500 would look better, not worse.

When Texas Instruments (TXN) reported a fabulous upside earnings surprise this week, the same fathead on CNBC said that didn't count because cellphones are free for most consumers — they are included in calling plans. So even though (he claims) consumer spending is cratering due to the housing slowdown, cellphone sales can still boom, so TI's communications semiconductors will still sell like hotcakes.