S&P Historical Earnings Analysis

Adapted from Robert Shiller's data set. Note that the darker blue line attempts to compensate for the dramatic swings in quarterly earnings to produce a "normalized" P/E ratio. This analytical transform may be particularly illuminating during times where earnings growth may be heavily driven by borrowed money -- borrowed money that, in turn, was cleverly offset as a liability on balance sheets by the asset appreciation created when everybody borrows money they can't pay back to drive up asset prices to use as collateral to borrow even more money they can't pay back: