S&P Valuation

I will be out of the office today - I will be playing in a golf tournament. However, before I go I just wanted to give a writeup with some thought on the valuation of this market. As discussed in one of my first posts in March (on the archive on the bottom left - either first or second week of March) that valuation of the S&P relies on two variables: 1) the operating earnings per share of all the 500 companies and 2) the PE multiple assigned to it. Both variables are rather debatable because for the earnings - many bulls feel that earnings could explode to the upside (due to deep corporate cost cuts) while the bears feel that earnings will dissapoint (due to weaker consumer, etc). It's safe to say that 2009's S&P operating earnings will be between $60-$65 a share. If you multiple those numbers by 15 (the multiple most analyst and economics are giving as a PE multiple due to inflation, trough earnings, etc) then you get a S&P range of 900-975. Well that is great but now that 2009 is 3/4's of the way over, we must look forward, as the market looks 3-6 months out. I believe the multiple of 15x will be constant - however, the operating earnings will be the true question of "mystery". If operating earnings stay flat - no growth, no shinkrage - then we the S&P ranges will remain between 900-975; showing this market is richly valued. Currently, First Call consensus for 2010 operating earnings is $74 - so 74*15 = 1,110 for S&P value - which could be achieved by summer of 2010 "IF" and that is a big "IF" these firms combined generate $74 (or are on track to be earning). I don't have a crystal ball and it's difficult to see but many people on both camps - "bulls" and "bears" are placing the big bets now. There is no question it will be challenging, so I will keep an open mind and research both stories out.