From Bloomberg;

The meager gains in earnings over the last year signal the U.S. economy is in much deeper trouble than the growth estimates indicate, economists said.

Gross domestic income (GDI), or the money earned by the people, businesses and government agencies whose purchases go into calculating gross domestic product, rose 0.3 percent in the 12 months ended in June after adjusting for inflation, according to Bloomberg calculations based on today’s Commerce Department growth report. GDP expanded 2.2 percent.

“The income side of the economy, with profits down for four straight quarters and employment falling, looks like a recession,” said John Ryding, chief economist at RDQ Economics in New York.

Date (Month, Year)…………………………………July 2007…………July 2008
Index Price………………………………………………..1520.7……………1256.0
Dividends …………………………………………………..$26.44……………$28.98
Earnings……………………………………………………..$70.32……………$56.88
Dividend Yield (%) …………………………………….1.74%…………….2.31%
Price Earnings Ratio ………………………………….21.63……………..22.08
Consumer Price Index ………………………………208.3……………..216.3

Index Rate of Return without dividend…………………………………………….[-17.41%]
Index Rate of Return with dividends………………………………………………..[-15.74%]

Official Inflation Rate……………………………………………………………………….3.84%
Return after inflation w/o dividends………………………………………………..[-21.25%]
Return after inflation with dividends………………………………………………[-19.58%]

Price of Gold…………………………………………………$650……………….$850
Implied Inflation……………………………………………………………………………30.7%

Return after implied inflation w/o dividends……………………………………[-48.1%]
Return after implied inflation with dividends…………………………………..[-45.8%]

Now while I think the implied inflation via the price of Gold is somewhat optimistic, neither do I subscribe to the official rate of 4% odd. It is obvious however that earnings have fallen rather dramatically, collapsed might be accurate. Is this trend likely to continue into the immediate future? I would say yes, Europe is also having major problems, China, with no-one to export to is suffering a capitalistic bust, earnings are not likely to be growing anytime soon.

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